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

[jperl]

	Quote:	Dogpile
	Blowfish, I meant its not abrupt in that it takes a good period of time for the POC to build. You are watching it and it is ever so slowly forming until it does. You are right that it basically gaps from the previous days level to the current days level. However, I would hardly call that abrupt. Its not like you expect the market to build the same POC on consecutive days. You know its going to build a different POC so you are fully cognizant of the fact that it is going to gap to the new level. 'Balance' is consistent with a consolidation pattern. When the market is consolidating, it is generally not moving much -- it is just churning -- this is the real-time action that is NOT abrupt. I see from the perspective you took that you can call it 'abrupt' -- I just don't think that is an accurate depiction of how a POC builds -- which is inherently slowly. But you do have a point.

Dogpile---
POC or PVP is not a continuous function of time even on the same day. You will see this when I show you some videos of the reversal trade. You are correct in the sense that it takes time for a new PVP to develop and replace the old PVP, but as an analytic function of time, it abruptly changes from the old value to the new. This is very much unlike the VWAP, which is a continuous function of time, and changes gradually as price action changes. I suggest you guys wait until I show the videos of this in a future thread, before you continue this discussion.
JERRY

[Dogpile]

<<POC or PVP is not a continuous function of time even on the same day. >>

this is part of the POC's appeal, IMO. the market has an interesting habit of touching old POC's. Since VWAP is moving with time, the VWAP does not develop the clean pivot prices like a POC does.

I see what you are using PVP for, I personally favor the technical pattern as it relates to a point of 'value' -- whether it be POC or VWAP. PVP is not as interesting to me in this regard. But I am interested in seeing where you are going with this nonetheless -- it might provide another angle upon which to understand some nuances of market behavior.

[jperl]

	Quote:	Dogpile
	this is part of the POC's appeal, IMO. the market has an interesting habit of touching old POC's.

Yes, I agree with you on this. Old POC's or PVP's do get touched. Again you will have to wait until we discuss this in a future thread. NEWBIE isn't ready for that yet. He only knows about today.

	Quote:	Dogpile
	Since VWAP is moving with time, the VWAP does not develop the clean pivot prices like a POC does.

Well it depends on what you mean by clean. VWAP is a pivot point or what I prefer to call a HUP, and it is dynamic, that is it can change with time.
Hopefully by the time we get to discussing HUP, we will be able to relegate static pivots to the dust bin.

[BlowFish]

[quote=Dogpile;14175]Blowfish, I meant its not abrupt in that it takes a good period of time for the POC to build. /QUOTE]

Ahh got you that explains it

[nelo]

Dogpile, I think you are constantly missing the point here and the difference between modal and average function intra-day.

VWAP always changes smoothly during the day, similarly as moving average it is unbroken, continuous function. Like a moving average - it is every day different as well as POC but this is not the point.

POC level development can be smooth for a short period of time during the day, but suddenly some completely separated hill can develop on the other side of the day's extreme and POC will jump immediately tens or hundreds of ticks - this always happens in double distribution days and several times during any day.

There are several "candidates" for a POC during the day, jumping up and down and it is up to your judgement which you take into account and only one will be POC at the end of the day. But there is just one, always smoothly moving VWAP. This is what everybody here means as 'abrupt' behavior of POC and this is intra-day behavior.

[Dogpile]

nelo, I understand all of that. I guess I just think of POC movement as secondary. I trade patterns while using the context of 'value' as a filter for my trades. I don't really care if you label POC 'abrupt' or not -- it is really not important what adjective you use to describe its movement. I understand how it moves -- I just think of it as a level of value and balance once it is established. Today you had a period of balance, a break away from balance and then an establishment of the second distribution. I couldn't care any less if everyone calls this movement 'abrupt' or not. Call it abrupt, don't call it abrupt, compare it to VWAP, don't compare it to VWAP -- whatever.

To me, what matters is that you understood that one price had been accepted -- and that price diverged away from that level which led to another balancing.

What is more interesting is -- look how NQ today went down and tagged Fridays closing VWAP. VWAP might be another powerful pivot for me -- but I will have to track it for a while before I use it like I do other key pivots (15-min EMA, last hour high & low, POC etc...). I use statistics for their tradeable tendencies. This helps give me a way to bias my trades. It is the pattern though that is important. Simple number-crunching of VWAP, POC, PVP or any other statistic is not going to leave you with an edge versus all the computer-powered algorithms of the world. You are not going to 'out-compute' the futures market. That said, I find the concept of Market Profile types of 'value determination' as very powerful ways to help give you confidence that the pattern you are seeing does have a statistical bias helping it to move in the direction you are trading.

[Dogpile]

nelo, please post how you used VWAP today to bias or enter trades. I would enjoy hearing how people are using it to trade.

[Dogpile]

here is my take for ES:

ES opened at Fridays POC/VWAP level. The market was thus opening 'in balance'. We had a push up away from this level and ES formed a balancing POC at 63.50 -- a level above the prevailing VWAP.

the market attempted and succeeded on a breakout away from the established point of balance near 1pm EST -- this had the effect of forming a morning high after 3 up days. This 'pattern' had me looking short. the market then offered 2 'shallow bear flags' on its push down. Price quickly fell and location now was FAR below VWAP and the earlier established POC at this point. Location was therefore difficult for any more shorting.

I did notice during this time that the PVP had now formed 'below' the VWAP (for ES). I was curious on this new concept that jperl outlined so I watched this with interest. jperl's advice would have been to bias trades long (if near the PVP price) since PVP was below the VWAP.

The problematic thing was that Dow, Rus & NQ all had PVP's above their VWAPs. So ES was kind of an outlier. So I would ask jperl and others what they do in this situation using their process?

I had my own opinion today -- but was curious what jperl thought of todays action.