VWAP, as we know is the, volume weighted average price and is used in financial markets to analyze the trades made by an investor as compared to the price and volume trends that ruled the market, mostly for a particular day. This tool is usually used for short term trading, and also finds deployment in algorithm based trading. Not the least, in order to use this properly, and efficiently, you must know how to read a VWAP, how to quickly make sense of it, and how to use it to your advantage. Although always the best is to hire services like executium.com for this, but still given below is a broad outline so that you know how to read VWAP.
Indicators: Read VWAP
VWAP in its simplest form is the ratio of the price of trade, to the total volume of trade that has been done over a period. So it can be shown as:
Practically, instead of being shown a numerical figure, you would mostly encounter a line graph. And you always know that if you traded below the value in the line, for a particular time of the day, you made a great trading deal, and if you traded above the line, you somewhere spent a few extra pennies for, let’s say, a particular cryptocurrency. You can also decide when to go for a short position or a long position based on the values of the cryptocurrency dancing below the VWAP line or above the VWAP line respectively.
Furthermore, a VWAP ratio is made up of three prices, the high price, the low price, and the closing price, for the time frame that it has been chosen to be plotted on. This time frame is usually recurrent 15 minutes or 5 minutes or 1 minute etc. However, the cumulative figures for the volume multiplied by price and then divided by the cumulative volume are plotted on a typical VWAP.
Why to Hire Professionals to Read VWAP
So remember that VWAP would give nothing but historical data. So even though you can use the above tips to read VWAP, it would still be difficult to use it to make advanced assumptions and inferences by a single handed investor. Now-a-days, many online service providers are there, who can help you read VWAP, and more importantly help you to make trading decisions after reading VWAP. You can check out executium.com as an example of an efficient online service provider for a number of facilities, like reading VWAP, providing support for pairs trading, arbitrage betting, tick trading etc. If you are trading in cryptocurrency, executium.com provides specialized services for almost all types of cryptocurrencies in the market. Also, VWAP is many a times used for deciding the pair trading strategy, which is rare in occurrence, so it is better to hire professionals so that you do not miss in case a chance arises. However, please ensure that you hire some reputable and efficient service, there being a lot of frauds as well now-a-days.