In this thread, we will present several videos to demonstrate how to use the volume distribution function and its associated Peak Volume Price (PVP) and its Volume Weighted Average Price (VWAP) as a trading tool. This thread will concentrate on entries and stops only for new traders. Our trader for this is named NEWBIE. We will show how NEWBIE should use the relationship between the
PVP discussed in
Part I and the
VWAP discussed in
Part II to determine a) the region of the price action where he could be trading, b)the direction of his trade (long or short) and c)a possible entry point for the trade.
So lets get started. Below is the first video. We have a very raw newbie, who knows nothing about market statistics. He's trading the Emini Russell 2000 index futures by the seat of his pants. He thinks he knows the market direction from the premarket open and the first half hour of trading. He's heard something about trend lines and "The Trend is your Friend" , so he enters a long trade, sets a profit target and a stop loss. Watch the video and see what happens. If you are a newbie yourself, see if you recognize any of NEWBIE's traits in yourself. The video ends with a short discussion of what NEWBIE could have done if he had used market statistics instead of the seat of his pants.
Enjoy,
JERRY