Trading With Market Statistics.II The Volume Weighted Average Price (VWAP).

[jperl]

	Quote:	Future
	Here is my 2cents with the VWAP. I keep a real-time record of the VWAP similar to how a POC moves higher or lower. As the VWAP is lifting I focus on the long side. If I am long and the VWAP starts to drop (even by tenths of a point) I take this as a warning signal. Vice versa for shorts. So picture the VWAP number moving up and down just like the tape. Also keep in mind that the VWAP is a common number viewed by many insitutional traders as well as the general public investors.

That's good Future.....glad to see you are using VWAP in your trading. Keep in mind that the dynamics of the VWAP is very different from the PVP (What you call the POC). The VWAP changes gradually over time, whereas the PVP changes abruptly. If you follow both the VWAP and PVP at the same time, you will see this dyanmic. I will show some videos of this so you can get the feel for how the market reacts to changes in the relative relation between the two.
JERRY

[Dogpile]

<<The VWAP changes gradually over time, whereas the PVP changes abruptly.>>

the POC does not change abruptly. I only say that because you previously stated that PVP and POC are the same concept.

The purpose of a POC is to show that price has been 'accepted' by buyers and sellers as fair. This only occurs over time. There is no POC until price has been accepted over time -- its just price discovery until then. (if we go a day where price isn't accepted at any price, then it is considered a trend day). we had a thread a month ago or so that discussed how long price had to settle before we considered it an 'accepted price.'

I agree that understanding 'value' versus 'current price' is an important trading concept -- and monitoring how price is acting as it attempts to break away from an established 'balance' is another important concept.

[jperl]

	Quote:	Dogpile
	the POC does not change abruptly. I only say that because you previously stated that PVP and POC are the same concept.

Ok Dogpile, I will accept your distinction. This is why I will use the term PVP rather than POC in describing the peak in the volume distribution function. This peak does change abruptly with time.
JERRY

[BlowFish]

The PoC does change abruptly as it is the modal point. So for example if there is a base with a PoC at 432 and price moves up to 478 and builds a new base as more volume is done (or more TPO's pass) at this point the PoC will jump as it becomes higher than the old point.

Cheers.

[Dogpile]

The POC changes every day. Maybe some would consider that abrupt. Sometimes the market builds what appears to be a POC but later it then builds the real POC at a higher or lower level later. Personally, in the timeframes that I watch the market, I do not consider that abrupt.

This is a core concept -- if you don't understand this -- you do not understand market profile. 'Price' moves in volatile/abrupt fashion, 'value' takes time to build. POC, by definition, does not move as abruptly as price. If you want to call POC movement 'abrupt' --- then what would you call 'price' movement -- 'super-duper abrupt'....?

[jperl]

	Quote:	Dogpile
	The POC changes every day. Maybe some would consider that abrupt. Sometimes the market builds what appears to be a POC but later it then builds the real POC at a higher or lower level later. Personally, in the timeframes that I watch the market, I do not consider that abrupt. This is a core concept -- if you don't understand this -- you do not understand market profile. 'Price' moves in volatile/abrupt fashion, 'value' takes time to build. POC, by definition, does not move as abruptly as price. If you want to call POC movement 'abrupt' --- then what would you call 'price' movement -- 'super-duper abrupt'....?

Dogpile---I suggest you wait to see the videos that I will be posting in the coming weeks. You will then understand what I mean by the discontinuous change that occurs in the PVP compared to the VWAP.
JERRY

[nelo]

Great thread, Jerry, thanks. The first message in it put a lot of light into VWAP usage for me. I watch it for daytrading and until now I just took it as a market sentiment indicator - price above VWAP = bullish and vice versa.

But the trick is to figure out (to a certain degree of probability) that the market went too far from VWAP and is about to return.

Also I found that the market very often bumps off the VWAP (refuses it), it is a good price level as well.

Jerry, we are definitely very interested in the video or further ideas, examples how you use VWAP for trading.

[jperl]

	Quote:	nelo
	Great thread, Jerry, thanks. The first message in it put a lot of light into VWAP usage for me. I watch it for daytrading and until now I just took it as a market sentiment indicator - price above VWAP = bullish and vice versa. But the trick is to figure out (to a certain degree of probability) that the market went too far from VWAP and is about to return. Also I found that the market very often bumps off the VWAP (refuses it), it is a good price level as well. Jerry, we are definitely very interested in the video or further ideas, examples how you use VWAP for trading.

Ok Nelo, glad you are finding this useful. there is more to come, so stay tuned

[BlowFish]

	Quote:	Dogpile
	The POC changes every day. Maybe some would consider that abrupt. Sometimes the market builds what appears to be a POC but later it then builds the real POC at a higher or lower level later. Personally, in the timeframes that I watch the market, I do not consider that abrupt. This is a core concept -- if you don't understand this -- you do not understand market profile. 'Price' moves in volatile/abrupt fashion, 'value' takes time to build. POC, by definition, does not move as abruptly as price. If you want to call POC movement 'abrupt' --- then what would you call 'price' movement -- 'super-duper abrupt'....?

Hi Dog,

I'm struggling to understand what you mean here what you say seems to support the abrupt PoC point of view.

As you say the PoC requires time to build (as it is defined as the 'most common' or modal point) When a new area of value has been build (by price staying there for long enough for more TPO's to build than at the old PoC) the PoC then moves abruptly (i.e. jumps) from the old PoC price to the new PoC price.

In most instruments price moves up and down tick by tick this is relatively 'smooth'. It is seldom (never for all intents and purposes) that price jumps from the old place of value to the new one. Of course as price moves from one area of value to another it tends to do that fast and volatile but it does at least move through the intermediate price levels. The PoC does not. Once new value has been built it jumps (moves abruptly) to the new level.

Actually Jerry's point was to do with