VWAP TRADING STRATEGY – How To Set STOP LOSS (Day trading) πŸ”₯πŸ”₯

– [Trainer] Welcome to the
video on VWAP Trading Strategy where I will discuss
how to set stop loss when trading with
VWAP Indicator. Now, I have covered Day
Trading and VWAP Indicator in great depth and link
to all those videos will come up at top
right end of your screen. So let’s get started. Before we get started,
do join the dedicated Telegram group for VWAP Traders. Link to the same would
come up in front of you. Now, based on the feedback
I received from lot of you, I did realize that one
detailed video about stop loss and exit was needed. In this part I will
take up stop loss, and in the next part, I
will cover exit techniques for VWAP Trading Strategy. Now, setting the right
stop loss is as important as exiting trades and
therefore let me show you how I do this while Day Trading. I have taken up eight
charts in this video, which are the most common
ways to enter trades based on VWAP Trading Strategy. For each of these charts
that I have selected, I have then explained how a
trader should set stop loss. These are the most common
ways VWAP Setup plays out and hence do watch this
video till the end. In this chart, price gapped
up when market opened and VWAP Indicator then
moved above the MVWAP line. Entry opportunity based
on the rules we discussed in the VWAP Trading strategy
video was not available until this candle here. Now in this type of entry,
do not set stop loss at low point of this candle. Stop loss has to be set at
the low point for the day. So if I am entering a trade
after closing of this candle here, I will set stop loss
at this particular point. I hope this is clear. Most traders when
they’re day trading, would use this
candle as stop loss, and this more often
than not, will get hit. Now in this second
case, we look into a short sell opportunity. Price gaps down in the morning,
along with VWAP Indicator being below the MVWAP line. When you encounter such opening, keep stop loss for the
trade above the high point of the entry candle. If you put your stop
loss at this swing point, you will stand to lose more if price were to
reverse for the day. Now, keeping stop loss
at this point is one of the most common mistakes
that is committed by traders and hence this
should be avoided. When price has gapped
lower, there is always risk of reversal and hence
you have to think about protecting
your capital here. This mainly applies gap
that are greater than 1.5%. Do note that trading
with VWAP Indicator once price has gapped
up or gapped down, is always little different and more riskier, and
hence you need to think about risk first before
initializing the trade. In this third
case, price gaps up in the form of a strong candle. And VWAP Indicator was already
above the MVWAP Indicator. So, therefore the
trend implication for this particular
chart was always bullish. When you find such
entry opportunities, place your stop loss near the
swing point in this region. Distance between gap and the
swing point is just about 1% and you should adopt
a safer strategy here while setting the stop loss. If you take the previous
example that we just saw, gap was of larger proportion
and hence our main aim was to protect capital. In this case, gap
is sort of limited, and hence, it is much safer to put a stop loss
at this point. Do note here that entry
candle is also closer to the resistance region and
hence there is always a chance of low of entry candle
being violated for the day. When you are looking to trade
gaps with VWAP Indicator, it is the magnitude
of gap that determines where stop loss will be set. I hope this aspect is clear. In this fourth case,
price has again gapped up and VWAP Indicator is clearly
above the MVWAP Indicator. Based on the VWAP
Trading Strategy video, entry conditions here
are certainly valid. In this entry case,
stop loss should be set at this region of consolidation. This example is very
similar to what we saw in the previous
slide and since gap here is not of
larger proportion, stop loss can be
set at this range. Apart from this
strong candle here, we also have three strong
bullish candles in this region. And therefore, setting
an initial stop loss around this level
is also logical. Do note that setting a stop
loss near well established support and resistance level,
is a very safe strategy to set a stop loss,
and this is something you should practice
consistently. Now in this fifth case, price
here opens in the middle of this wide range bearish
candle and then heads lower. Again entry conditions as
per the VWAP Trading Strategy video are valid. VWAP Indicator is clearly
below the MVWAP line and we do get a strong bearish
candle on the downside. In this entry scenario, I
would place my stop loss at high of the entry candle. These three bearish
candles that you see, represent strong
momentum on the downside and hence setting a stop loss
at this particular swing point is not of much help. If you place stop loss
at this swing point, your position size
would be limited and you won’t benefit
much if trend was to move in your favor. Setting a stop loss at
high point of entry candle is a much smarter strategy here as this represents point of
renewed supply in the market. You can also set the stop loss
at high point of this third candle here and this
would also be fine. Do note that stop loss has
to be set in such a way that gives you optimum
balance between position size and your risk. This is an important
point to consider and hence do take note of this, because not many day traders
find a balance between position size and risk. So until now we have seen
cases where entry opportunity as per VWAP Trading strategy was available in
the morning session. Let us now take up
few cases where entry is taken in the
afternoon session. As such entry opportunities
are quite common and stop loss is set
differently for this. In this chart, entry opportunity
showed up at 2:30 p.m. So, VWAP Indicator was
already above the MWVAP line and then we got this
strong bullish candle here. During such entry cases,
always mark out swing low as the stop loss level. In this specific example,
I would place stop loss at this particular
swing low for the day. Keeping entry candle low as
stop loss is one of the most basic mistakes committed, and hence avoid doing
this at all costs. Even if this candle
was wide in range, I would still prefer
setting stop loss at the nearest swing low point. See the thing is in the
afternoon session price is more volatile
and hence stop loss, which is set at the entry candle is more likely to be hit. You need to account for
the volatility factor during the day and hence
stop loss needs to be set at this particular
swing low point, which does incorporate
the underlying volatility for the day. Now this mainly applies
to afternoon session only. In this seventh case, entry
as per VWAP Trading Strategy came about at 2 p.m. VWAP Indicator is
above the MVWAP line and conditions were
right for a long trade. Even in this case, I would
prefer placing stop loss at the most recent
swing low point rather than placing
the stop loss at low of this particular
wide range candle. Do note here that entry
candle in this particular case is wide enough and had it
formed in the morning session, I would have placed stop loss
at low point of this candle. This is one of the variations
that you have to keep in mind with respect to when the entry
candle forms on the chart. When I am setting stop
loss for VWAP Trade, I do take into consideration
the width of the candle and also when it forms. I will summarize this for
you into specific rules towards the end of this video. So this is another case where
entry based on VWAP Indicator comes about at 2 p.m. If I were trading this,
I would still prefer placing stop loss at this
particular swing low point. As this is where
shift in sentiment has begun for the day. Do note here that VWAP
Indicator is still below the MVWAP line, but since
this candle was so strong, and it was above the near
term resistance level, such variation
trades can be taken. As per stop loss is concerned, you have to understand that
during the afternoon session, there are times, when low
of such strong candles are revisited to test
out demand in the market. And hence I don’t think
it is a safe strategy to use low point
as stop loss here. This is also
applicable to traders who prefer trading in weekly
options as an instrument. Options are more volatile
and the decay factor in the options may cause
for price to test out lows of such strong candles. And this is more applicable
in expiry sessions. Now as a trader it
is important for you to identify low risk
strategies, with respect to entry and stop loss. The more you focus
on these two aspects, the more your
results will improve. Do note that while entry and
position size is important, traders often neglect
studying where to put stop losses in detail. This I think is the
number one reason why they don’t succeed over
long term in day trading. So let me now give out
specific stop loss rules that you should follow
in VWAP Trading Strategy. If possible, do take
a screenshot of this
particular slide. Rule number one, when gap is
greater than 1.2 and 1.5%, always prefer setting stop loss at low or high of
the entry candle. Rule number two, when
gap is less than 1.2%, prefer setting stop loss near
the swing high or low level. Entry candle as stop loss
should be avoided here. Rule Number three, if you get
wide range candle as entry in the morning session, then
prefer setting stop loss at low of entry candle. Rule number four, if wide
range entry candle forms in the afternoon session, then
stop loss needs to be kept at nearest swing low point. This is mainly
because volatility is high in the afternoon session and price revisiting
the low of entry candle is always high. What I have given here
are four basic rules, which will cover
over 80% of cases you will encounter
in VWAP Trading. So, what I’ll recommend
here is for you to put these to practice and
to do let me know if you have doubts
about the same. Link to all previous VWAP
Trading Strategy videos will come up at top
right end of your screen. So kindly consider
hitting the like button and sharing this video
if you find it useful. Thanks a lot for
watching this video guys. Take care and be safe.

33 thoughts on “VWAP TRADING STRATEGY – How To Set STOP LOSS (Day trading) πŸ”₯πŸ”₯

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  2. Dear Sir,
    I use zerodha platform for trading and I do not find MVWAP indicator, it has only VWAP indicator. Kindly tell me what should I do.




  4. What is the next trading set up series you are willing to post?
    BTW vwap series is awesome 😁

  5. i generally keep a few decimals farther than mvwap/ vwap which ever is farther ….

  6. Yet another good video Sirji, but y.day with yr input, I took a trade in HUL made profit but throughout day sellers were more than the buyers, price was moving up, of course whipsaws. Many times seen like this, is there any logic to see buyers & sellers? if so how come less buyers price going up? Kindly explain

  7. Another very useful video….
    This will helps a lot to market learner.
    Sir u talk about relative strength ( not Rsi ) In previous videos.
    I cannot find that on trendingview.com.
    Can you share the link.
    Thank you.

  8. Only problem with VWAP is at what time price will touch it cannot be predicted.

  9. Learning from you is always exciting.

    Would it be wise to set stop based on certain percent of atr for day trading?

    Or as you mentioned?

    Thank you master. πŸ™‚

  10. Sir,very informative good analysis. When are you are you releasing ICHIMOKU part 2 video?

  11. Welcome to rule based trading system to increase the RR.
    It will also help the trader to limit his position size & protect the capital from wiping out.
    Well explained

  12. sr u have cleared most of my doubt about stop loss. will backtest and apply for sure. thx…πŸ™πŸ™

  13. Thank you ST sir (don't know actual name yet) for much needed video πŸ‘ŒπŸ‘Œanalyzing and learning a lot from your daily trades you post in telegram channel… God bless…

  14. Thanks for your effort and time ST. Thanks for teaching the art of setting stop loss for different situation. Any update about MACD series 3rd part ? Thanks a lot. Have a nice time.

  15. Most of the time we will not get money in intraday trading, Our capital will be lost after some days, better to avoid intraday trading, try positional trading/swing trading.

  16. Thanks for the well explained SL! For the VWAP strategy, very recently (a couple of trades) I started using "ATR Trailing Stop" (multiplier 2 & period 14). Appreciate your view on using this.

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