Trade with Trend

VWAP Trading
Quick Reference Guide

Trade with Trend - YouTube

12-1-2019
Contents
Balance & Imbalance on Charts .............................................................................................................. 2
Best Sectors for VWAP Trading ............................................................................................................... 3
Other Time Frame Traders (Institutional Traders).................................................................................. 4
MSCI Index Links ..................................................................................................................................... 5
Exit for Short Term Trading ..................................................................................................................... 6
Broader Market Trend & Advance Decline ............................................................................................. 8
Exit Rules Checklist.................................................................................................................................. 9
Pattern & VSA Guidelines ..................................................................................................................... 10
Trend Guidelines for Day & Short-term Trading ................................................................................... 11
Pre-Market Open & Day Trading Entry Checklist.................................................................................. 12
Stock Selection & Watch List Guidelines .............................................................................................. 13
Types of Entry ....................................................................................................................................... 14
Risk Management ................................................................................................................................. 15
Open Interest Guidelines ...................................................................................................................... 16
Link to All Videos ................................................................................................................................... 17
Link to Open Interest Data .................................................................................................................... 18
VIX & Guidelines.................................................................................................................................... 19
Disclaimer.............................................................................................................................................. 20

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Balance & Imbalance on Charts

Balance on a chart is a region where Institutional Traders are absent in the market. To know
more about OTF or Institutional Traders, scroll down to Page 5. Balance on chart develops as
Institutional Traders offload their positions. This is the region where maximum weak hands are
present in the market and most of the participation here will be of Retail Traders & Small
Trading prop desks. Price is range bound during such phases and Trending moves are
completely absent. One of the main reasons why Retail Traders fail in Day & Short-Term
trading is because they participate the most in Balance regions.

Imbalance on chart occurs when Institutional Traders enter the market and drive price either
lower or higher. As Traders, we need to participate only in Imbalance phase where presence of
such strong traders is clearly evident.

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Best Sectors for VWAP Trading

As Day Traders and Short-Term Traders, we need to be specific about the Sectors we choose.
If you pay close attention to the Trades I put up, about 90% Trades are from Banking &
Financial Sector, Metals, Commodities, Energy & Infrastructure. Remaining 10% Trades are
from Defensives & Technology space.

This is not to say that VWAP Trading does not work on Defensive & Technology Sector. It is
just that there are some sectors which are more prone to Day & Short-term movement and
hence these should be preferred. Even when I researched on U.S. & U.K. markets, my finding
was more or less consistent.

Top Sectors to Focus Upon (In order of preference)

1. Banking & Financial Services

2. Metals, Energy & Commodities
3. Infrastructure & Construction
4. Defensives (Mainly Technology)

For those of you who are in the U.S. or in Europe, you also have the option to Trade ETF’s.
Focus on MSCI ETF’s. These also tend to move a lot over short term. Some of the instruments
(symbols given below) which I would suggest are,

1) SPY
2) AMD
3) NFLX
4) AMZN
5) FB
6) MS
7) TWTR
8) SUNE
9) AAPL
10) DAL
11) TSLA

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Other Time Frame Traders (Institutional Traders)

OTF Traders are the Big pocket players in the Market. They are the ones who create Demand
& Supply in the Market and our job is to align in the Direction of Trend set by them.

As Retail participants, we are Small players in the market and our positions have minimum
impact in creating large demand or supply. Therefore, it is much more logical to follow what
Other Time Frame traders are doing.

There are several ways to spot OTF Traders in Market and this is something we have discussed
in depth. If the Term OTF Traders has come up in the video without the detailed section on it,
then for now, just understand that OTF Traders are Institutional Traders who need to be tracked
closely.

One of the easiest ways to spot OTF Traders is to look for charts which are Out of Balance and
then look at corresponding volume activity.

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MSCI Index Links

MSCI India Index

https://www.msci.com/documents/10199/1ad792ce-3199-445c-8be3-f2a035ac782d

MSCI India Small Cap Index

https://www.msci.com/documents/10199/fdcc71dd-80ee-42af-a470-b2b67db67530

MSCI India Mid Cap Index

https://www.msci.com/documents/10199/486de8eb-4276-4d92-81e1-31efa6d4a80e

MSCI Mid Cap USA

https://www.msci.com/documents/10199/50394da9-6362-4580-bae3-5b5cb512350c

MSCI Small Cap USA

https://www.msci.com/documents/10199/8038650a-0e6f-43d5-bdb0-1f8f3063e565

MSCI Large Cap USA

https://www.msci.com/documents/10199/40770696-16c0-4b70-89f6-9a8496722fa7

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Exit for Short Term Trading

Exit in short term trading is not at all complicated. In Day trading, based on Momentum we
decide to exit at 1-1.5% fixed gain or at 2-2.5%. It all depends on the underlying conditions of
the market. Exit rules for Day Trading are covered in a separate section and refer to the Index
of this PDF document to revisit the rules.

For Short term trading, you only have to follow structure of higher high and higher low to exit
the Trade. What I generally do is, I exit 50% positions between 5-6% and then for remaining
50% positions, I simply use a structure of higher high and higher low.

Refer to the Two charts in this section and this should be clear to you.

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Trade with Trend – YouTube. Copyright 2019. All Rights Reserved.
Broader Market Trend & Advance Decline

Many Traders don’t realize the Importance of Broader market in Day Trading & Short – Term
Trading. In Day Trading at least, I would define Broader market trend with help of Advance
Decline data.

In my experience, I have found Advance decline reading below 0.7 to be the most optimum for
Short sell trades. For Long trades, Advance decline reading above 1.5 is positive. If you get
Advance decline reading of 3 or 4 in the morning session, then let the market settle. Do not
rush into taking Trades.

In most case, 80% of Day trading move is already over in the first 30 minutes of Trading. This
is precisely why you need to wait out and Enter when you have more information and you have
substantial amount of time left in the market for the session to end.

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Exit Rules Checklist

1. After Entry, Lack of Momentum – After you take entry in the Stock, you need to assess
the underlying momentum in terms of number of Wide range candles that form post Entry. If
you cannot spot Wide range candles for 30-40 minutes, then prepare for a Fixed percentage
exit of 1- 1.5%. On such day’s Advance decline ratio is somewhere between 0.9 – 1.3.

Do calculate R2 & R3 (Standard Pivot Points) once you enter and see If your Fixed percentage
exit coincides with R2.

2. After Entry, Strong Momentum – After you take entry, if you spot wide range candles on
the chart, then be prepared to exit 50% positions at 2% and hold the remaining for end of the
day. On such days, if Advance decline ratio is above 2, then odds are high for you to get 2% or
higher.

Calculate R2 & R3 after you take entry. On Strong momentum days, Price easily crosses R2
and moves towards R3 and beyond.

Kindly note, S1, S2, S3 & R1, R2, R3 are standard Pivot points and calculation of these was
shown in the Intraday Trading playlist.

After you take entry, calculate what is 1%, 1.5% & 2% from your Entry point. If possible, mark
these on the chart.

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Pattern & VSA Guidelines

Let me just summarize the most Important guidelines of Patterns & VSA. Revise these daily
before market opens.

1) Close of the Candle is extremely important.

2) Candle should be wide in range and,
3) Volume expansion should be visible.
4) Long wick with High volume denotes supply in Market,
5) Long tail and High volume denote demand in Market.
6) Wide range candle with Strong close and high volume is sign of Strength Candle.
7) Strength candle is vital in Entry & Exit.
8) Narrow range candles with high volume are Reversal candles.

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Trend Guidelines for Day & Short-term Trading

1. Always align with Stronger players in the market.

2. For trend reference, focus on Daily time frame.
3. Use 50 Day moving average to identify bias of Trend.
4. Look for Price being above or below 50 Day moving average.
5. Apart from these, do not forget importance of Slope of moving average.

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Pre-Market Open & Day Trading Entry Checklist

1. Check for Trend of S&P 500, Nikkei & DAX.

2. Check for which sectors are performing well in Pre-Market open.
3. If most high beta sectors perform well, take note of same.
4. Check for trend of Volatility Index.
5. Avoid taking simultaneous position in High beta & Defensive sectors.
6. For Day Trading entry,
a. Check for Trend of Stock
b. Check for VWAP Structure
c. Check for Volume Profile Criteria
d. Volume expansion should be visible
e. Wide Range candle should also be visible
f. Balance on chart (Most crucial)
7. For Short Term Trading,
a. Check for Trend of Stock
b. Check for Volume Profile condition
c. Balance on chart should be visible
d. Check for Volume expansion
e. Check for Wide range candle
f. No near-term Resistance levels

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Stock Selection & Watch List Guidelines

1. Focus on Stocks where Institutional Traders are active. This should form your watchlist.
2. Focus on having no more than 30 Stocks in Watchlist. Follow steps shown in the
Training.
3. Watchlist of 30 Stocks to be revised once in 6 months. Remember, consistency is the
key here.
4. Stocks which are Out of Balance should be selected,
5. Along with this, all conditions of VWAP Structure & Trend should be fulfilled.
6. Avoid Stocks that show too much deviation away from VWAP Structure.
7. Prefer Stocks within the Volume profile region.
8. Only those Stocks to be selected which qualify for Short term trades.

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Types of Entry

1. Morning Entry is the Riskiest. Stay away from this for at least 6 Months.
2. Focus on Morning Retracement & Morning Breakout.
3. Out of these, Morning Breakout is the easiest to Trade.
4. Afternoon Trades to be taken before 2:45 Pm.
5. Only exception of Afternoon time is if it is Expiry session.
6. Do not Trade gaps for the first 6 months. Experience is Important.
7. If you want to Trade gaps in future, then prefer entering with Morning Retracement.

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Risk Management

1. Prefer Equities. This will save you a lot of Money in the end.
2. Equities offer tremendous amount of flexibility.
3. Avoid scaling in with this method.
4. Follow Risk stages that I have shown. This is important. Think Risk first.
5. To Calculate Position Size,
a. Identify Entry Level
b. Identify Stop Loss Level
c. Define Risk Per Trade
d. Position Size = (Risk Per Trade) / (Difference of Entry & Stop Loss)
6. Do not venture into F&O.

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Open Interest Guidelines

1. Identify Stock based on all the Rules discussed.

2. Before entering the Stock, check for Net Open Interest one day prior to Current date.
3. Make sure you check for Net Open Interest of entire Option chain.
4. Clearly mark out Resistance level in terms of Open Interest addition at Call Strike Price.
5. Prefer only those stocks where Open Interest (Resistance) is not spread across all strike
prices.
6. If you have 2-4 Stocks you want to Trade, prefer the one with least Open Interest
resistance.
7. If the Stock you select has significant overhead Resistance in terms of Open Interest,
then reduce Risk per trade amount by Half.

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Link to All Videos

Following are all resources available on Trade with Trend YouTube Channel.

1. Intraday Trading - https://bit.ly/2oDtH08

2. Swing Trading - https://bit.ly/2JY4SDR
3. Heiken Ashi - https://bit.ly/2NFgzAm
4. Options Trading - https://bit.ly/2qebBlR
5. Market Profile - https://bit.ly/2r4q58h
6. Futures Trading - https://bit.ly/2N8qijg
7. Ichimoku - https://bit.ly/2r1WNqQ
8. Stock Picking - https://bit.ly/36nUmPz

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Link to Open Interest Data

I refer to Sensibull Trading platform for Open Interest data. Trade with Trend has no
commercial affiliation with this website. Link to Sensibull website is given below,

https://web.sensibull.com

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VIX & Guidelines

1. Volatility Index is Important for Day Trading

2. When Volatility is high, prefer Low Beta & Defensive sectors.
3. When Volatility is low, prefer High Beta sectors.
4. If possible, keep an eye on Chart of Volatility Index. This will help.
5. For those in the U.S., prefer tracking CBOE Volatility or Nasdaq Vol Index.

More updates for each Section will be given In VWAP Trading Club section.

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