Intraday Trend Following Strategies:
What is the trend-following strategies?
Trend-following strategies are trading methods that attempt to profit from long-term market trends. These strategies involve buying and selling securities in response to changes in the direction of prices. This may involve taking long positions in rising markets and short positions in falling markets. Trend-following strategies require the trader to identify trends, monitor the trend, and adjust their positions as the trend progresses.
What is Volume Weighted Average Price (VWAP)?
The volume-weighted average price (VWAP) is a metric that shows the average price of a security adjusted for volume. It is calculated during a specific trading session by taking the total value of trading in the security and dividing it by the volume of trades. VWAP acts as strong support for uptrend stocks & resistance for downtrend stocks. It is a very powerful technical tool for Intraday trading.
Check the following two methods to trade directional moves in stocks or indexes:
a. Price Action + Volume Weighted Average Price (VWAP)
b. Opening Range Breakout
Price Action + Volume Weighted Average Price (VWAP) on 5 mins timeframe
Rules for the Buying Entry:
1. On 5 mins timeframe check for a one-sided up move in the first 30 mins
2. Wait for a retracement to VWAP support and form a bullish candlestick pattern
3. Take entry above the signal candle
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Exit Rules:
Place Stop loss below the low of the signal candle ( i.e. candle took support at VWAP)
OR
Close position 15 mins before the market closes
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VWAP default setting: hlc3
Rules for the Short Sell Entry:
1. On 5 mins timeframe check for a one-sided down move in the first 30 mins
2. Wait for a retracement to VWAP resistance and form a bearish candlestick pattern
3. Take entry below the signal candle
​
Exit Rules:
Place Stop loss above the high of the signal candle ( i.e. candle faced resistance at VWAP)
OR
Close position 15 mins before the market closes
​
VWAP default setting: hlc3
Opening Range Breakout - 5 mins timeframe
Rules for the Buy Entry:
1. Wait for the first 30 mins to develop the range above the previous day's high
2. Take a buy entry if the 5 mins candle closes above the high of the first 30 mins range
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Exit Rules:
Place Stop loss below the mid-level of the first 30 mins range
OR
Close position 15 mins before the market closes
​
Rules for the Sell Entry:
1. Wait for the first 30 mins to develop the range below the previous day's low
2. Take a sell entry if the 5 mins candle closes below the low of the first 30 mins range
​
Exit Rules:
Place Stop loss above the mid-level of the first 30 mins range
OR
Close position 15 mins before the market closes
​
