VWAP Vs Pivot Points

[smuhr]

Good evening,

For day trading, is VWAP better than Pivot Points ?

What is your point of view ?

Regards,
Steven

[sevensa]

Originally Posted by smuhr Good evening, For day trading, is VWAP better than Pivot Points ? What is your point of view ? Regards, Steven

It depends what you want to use it for, doesn't it?

What is better? A Land Rover or a Porsche 911?

[Eric Johnson]

For me it comes down to how will the market respond to the tool? There are so many indicators and lines to put on a chart. I think that more people use pivots and respond to them. Remember that there are daily, weekly and monthly pivots. I put the weekly on my 60 minute charts and daily on my 5 minutes. They carry weight like trend lines.
I use the VWAP for isolating a conditional trade that has a high predictability. It is like pattern recognition and specific parameters for execution.
My charts can lean to the complex side, because I am very familiar with my tools and I prefer the confirmation of as many tools that enhance the outcome, and filter fakeouts. Why settle for two, when with careful work and paintbars, you can have confirmation, visuals for stops, cycle forecast lines, and alerts to make trading more precise, and for me simpler. It is a checklist.
Some people don't care for complexity. For me the basic simple chart is like binary computer code of zero or one. The advanced chart like a programming language. Finally there is a highly functional chart, like windows operating system. The complexity is hidden behind paintbars and alerts. The design work is refined and for each market condition, the tools are available. When you have a question of validity of a trade, there are confirmations and preset qualifiers. Also with alerts, you are not watching the screen over trading.
So to keep with the subject, use them both, and develop tools to determine market conditions that they work best in.
I attached a chart that is an example of what I mean by paint bar simplicity. It is running about 30 tuned indicators that are hidden, but trigger when the paintbars show. So simply when I get a vertical concentration of paintbars it means to me, the trend is weakening, get ready for a pullback or some choppier trading. The paintbars are color coded for early warnings in oscillating markets, and some to find the momentum tops of longer trends. Quotetracker makes this process reasonable to set up.

[BlowFish]

Both are watched by enough people to be interesting. Both are good as reference points to let you know 'where you are in relation to' and both are OK places to initiate trades though you will obviously need a few rules. If I wanted (a computed) horizontal line I would go PP for a sloping one VWAP. (though you can easily make a PP slope should you so desire). Another concideration is whether volume information is available personally I would not consider a VWAP for spot FX.

[Eric Johnson]

There seems to be a many versions of the VWAP out there on different platforms.
VWAP Based Pivots | NeoTicker Blog
Anyhow I thought I would add this aspect for definition before the thread progresses or gets confusing.
For Quote tracker it is a line that changes location according to how many bars you have on your screen viewing at one time (panning).
Well, I get frustrated with the limited time to edit a post, so please bear with me as I post a clearer chart that I would have preferred.It relates to my previous post about a complex hidden indicators, made useful by paint bars and alerts. The paint bars are showing up in vertical concentration at points of trend weakening. The light blue line is the VWAP.

[smuhr]

Originally Posted by sevensa It depends what you want to use it for, doesn't it? What is better? A Land Rover or a Porsche 911?

I would like to use it for 5 min - 15 mins trades.
Like PP VWAP allows you to find S/R.

[sevensa]

Originally Posted by smuhr I would like to use it for 5 min - 15 mins trades. Like PP VWAP allows you to find S/R.

I doubt that one is better than the other. Some days one will look like S/R and other days price will just go through it like they don't exist. The "advantage" of PP's are that you have more lines, so a better change to have prices reached some of them.

VWAP has a bit of logic behind it, but PP for me are just lines without any logical reason behind them and I haven't seen a system trading them profitably. Some people even draw the midpoint lines between R1 and R2 and S1 and S2. If you draw enough lines, some of them have to look like providing S/R at some point. Thinking something will provide S/R just because a formula based on yesterday's OHLC say so makes no sense to me and is the same than moving averages that people claims provide support. You can draw any length moving average and see that at some point it look like they provide S/R.

If you want to learn S/R, I suggest you look at the DBPhoenix's thread on here about defining S/R in foresight. That makes more sense to me than drawing random lines on a chart thinking they will provide S/R.

[BlowFish]

Originally Posted by smuhr I would like to use it for 5 min - 15 mins trades. Like PP VWAP allows you to find S/R.

That still doesn't completely answer svensas question. In my previous post I suggested some things both are OK for. Personally if I where you I would ask myself 'what do I want to achieve'? rather than put the emphasis on the tool, 'what is this tool good for'?

Hand drawn S/R is likely to be superior to both PP & VWAP however both are adequate to trade against in a similar fashion to S/R. When you get down to it you will find at times that both appear to turn price to the tick (and you will likely swoon) and at other times they both will be chopped to death (have price oscillate around them) and you will likely curse.

Why not use excel to see which appears best for what you want to do? You are far more likely to have faith in your findings than some anonymous poster on the interwebz aren't you? For example last I looked the ES will trade within a tick or two of the daily pivot over 68% of days.(you can construct hourly pivots or 150tick or 2.5 day pivots btw) . That information could possibly be used as the basis for a profitable strategy. (and I know of one vendor that sells such a system).

[smuhr]

Originally Posted by BlowFish Hand drawn S/R is likely to be superior to both PP & VWAP however both are adequate to trade against in a similar fashion to S/R.

As you said : "Hand drawn S/R is more efficient". I should have more self-confidence in my price action analysis.

With VWAP or PP I just want to verify my supposition and find high propability S/R.

[DugDug]

I actually thought VWAP (volume weighted average price)---(this is the same thing) was introduced by institutions in order to measure how good a brokers executions were over the day.
So while I guess it might an offer of where you would expect some reversion to the mean to occur throughout the day - it seems that a Moving avg would do much the same thing?
whereas a PP is looking for turning points in the market.......kind of very different.

maybe you could combine the two?
look to enter as a reversion to the mean, after a pivot point!
(or possibly I am missing the point)