“To summarize my trading strategy for VWAP Moving Average Trend trading: When I am monitoring a Stock in Play and notice a trend is establishing around a moving average (usually 9 EMA) in the Late-Morning session, I consider VWAP Moving Average Trend trading. If the stock has already lost the VWAP (from a VWAP False Breakout), it most likely will stay below the VWAP. Similarly, if the stock squeezed above the VWAP in the Late-Morning session, it is most likely that it will stay above the VWAP, as it means the buyers are in control. Once I learn that either 9 or 20 EMA are acting as either a support or resistance, I buy the stock after confirmation of moving averages as a support, but only if I can clearly see it “held” the VWAP. Similarly, I go short below the moving averages if I have the confirmation that it has “lost” the VWAP in the Late-Morning session. I buy or sell short as close as possible to the moving average line (in order to have a small stop). My stop will usually be 5 to 10 cents below the moving average line or, if a candlestick, close below the moving average (for long positions). For short positions, a close above the moving average would stop me out. I ride the trend until the break of 9 or 20 EMA. Usually, 20 EMA is a stronger support or resistance, so it is better to wait for that. I usually do not use trailing stops and I constantly monitor the trend with my eyes, but I know that many traders also use trailing stops. If the stock is moving really high away from the moving average, offering me an equally really nice unrealized profit, I may take some profit, usually at the 1/4 or half-position. I do not always wait until the break of moving average for my exit. Traders will say: you can never go broke by taking good profits. If the price pulls back to the moving average, I may add again to my position and continue the VWAP Moving Average Trend trade. Remember, when you take profit, you should always bring your stop loss to break-even. Never go red on a stock that you already booked some profit on.”
―
Day Trading for a Living
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