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Market pros use VWAP. Do you?
We’re talking about the volume-weighted average price. Institutional traders have used it for a long time to know where they stand versus everyone else in the market.
Unlike a simple average based on time, VWAP is weighted by volume. More shares or contracts trading at a certain price will pull the VWAP in that direction, regardless of time. Mutual funds and pension managers often use it as a reference point for knowing where to buy or sell.
Intraday VWAP with RadarScreen, showing S&P 500 e-mini futures (@ES). 3-minute chart.
This screenshot shows Intraday VWAP with RadarScreen, available in TradeStation’s TradingApp® Store. (Free trials are available.)
This program does more than just calculate VWAP. It also plots values over the previous four sessions with horizontal lines, helping clients see potential support or resistance levels.
The other powerful feature is a special RadarScreen® to alert users when key instruments cross the different VWAPs. For example, if the S&P 500 e-mini futures (@ES) cross yesterday’s value, it will flash an alert. The right column will then remember the most recent alert, reminding you that it was either bullish or bearish.
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