
11

6
Volume Weighted Average Price
Wed, Apr 29 2009, 14:25 GMT
by Mark Whistler
WallStreetRockStar.com
In currency trading, many retail traders can lose fortunes, before ever even hearing about VWAP and TWAP. It's proclaimed 'hi-tech' at home traders can seemingly miss major institutional benchmarks like I have just mentioned. Clearly, the simple fact that so many retail traders have no clue about VWAP, simply proves suc within the hands of those controlling the bulk of the order flow.
VWAP (Volume Weighted Average Price is really the average price over an average period of time, weighted for the amount of shares that are traded over the duration of the session.
For institutional traders who are running order flow, VWAP is used as a major benchmark for those who seek passivity in order expectation. In other words, trading to VWAP is a way for institutional traders to either remain anonymous, or simply dollar cost average during the session.
The VWAP is calculated using the following formula:

Where:
PVWAP = Volume Weighted Average Price
Pj = price of trade j
Qj = quantity of trade j
j = each individual trade that takes place over the defined period of time, excluding cross trades and basket cross trades.
The code provided to FXStreet is modified VWAP, which will show traders the Volume Weighted Average Price over the given timeframe of bars measured… Unlike equity markets, the VWAP code will not measure the Volume Weighted Average Price from the beginning of the session until the end, as currency markets are open 24-hours a day. With this in mind, traders can 'reset' the code to measure from each days open (5:00 PM EST), however, the code provided should allow greater guidance into institutional mindset, based on the divergence from typical moving averages.
Exit is Everything,
Download here the VWAP code for MetaTrader / MetaEditor
Published on
Wed, Apr 29 2009, 14:25 GMT
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PLEASE DO NOT ATTEMPT TO TRADE FOREX IF YOU FEEL THE AFOREMENTIONED EVEN REMOTELY APPROACHES YOUR RISK TOLERANCE. THE BEST ADVICE TO MOST INDIVIDUAL'S CONSIDERING TRADING FOREX – IS UNLESS YOU HAVE PROFESSIONAL HELP – DON'T.
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