VWAP Squeeze Foreign currency trading technique

Trading strategies have two important components, entry and exit. For the most part, a lot has been said about entry strategies, and it is very important that we understand when to start trading based on a strategy or a thesis. Of course, we don't want to make trades with low probability. However, most traders tend to forget the second part of the trade, which is just as important, the exit. Without this, it is unlikely that we can get the most out of a trade setup.

We have often heard of the old trade saying: "Cut your losers and let your winners run away." It is very logical. We keep our losses to a minimum while trying to get the most out of our winning trades. But how do we do that?

VWAP Trail Stop – A logical way to get profits from a trade

What is VWAP and how can we use it to our advantage? VWAP, or volume weighted average price, is a calculation of the average price of a particular tradable security or commodity. Similar to a moving average, the average price is calculated. The difference is that, unlike moving averages, which only calculate averages based on historical price, VWAP takes volume into account.

Since VWAP takes volume into account when calculating the average price, price movements associated with a large volume have a greater impact on the VWAP than price movements with less volume behind it. On a chart, the VWAP line would have steeper slopes with price increases with volume than price movements with less volume.

This makes VWAP a useful tool for trading in many ways. One way to use it is to base it on subsequent stops. Since VWAP lines move more strongly when prices move, it is also likely that there will be momentum when VWAP moves strongly. And if the momentum merges with an open trade, it would be logical to assume that the price would not reverse prematurely unless there is a stronger price movement against the current momentum.

Some professional traders track their stop losses a bit behind a selected VWAP. There are cases where the price goes back and bounces off the VWAP. However, if the price breaks the VWAP and continues to fall, it could mean the momentum is shifting and it could be a good idea to exit trading. This is the logic behind trailing stop losses with VWAPs.

Trading strategy concept

There are many profitable strategies that aim to get as much profit as possible from winning trades. One type of strategy that requires this is a moving average crossover strategy. The entry is not the focus of this strategy. In fact, you can use any strategy that you can use to make big moves. For this strategy, however, we use a crossover of the 5-period exponential moving average (EMA) over a 200-period EMA.

The core of this strategy is to get as much profit as possible from a successful trade setup with a trailing stop. Some traders track the stop loss behind a VWAP. This usually happens among stock traders. However, VWAPs are dynamic. It would also be beneficial to use a dynamic distance behind the VWAP. We use two VWAPs, a VWAP with 20 and 50 periods. The trailing stop loss would then be placed between these two VWAPs. If the price breaches the 20-period VWAP and reaches the middle of the range between 20 and 50, we would assume that the short-term trend may end, so the trade closes automatically.

Indicators:

  • 5-period EMA (gold)
  • 200-period EMA (green)
  • Volume_Weighted_MA: 20 & 50 periods (brown)

Time frame: any

Currency pair: any

Trading session: any

Purchase (Long) Trade Setup rules

entry

  • The 5 EMA should exceed the 200 EMA
  • The candle should close well over 200 EMA
  • Enter a purchase market order at the end of the candle

Stop loss

  • Set the initial stop loss below 200 EMA. or
  • Place the stop loss under the bottom of the candle

Exit: Trailing Stop Loss

  • Once the trade makes a profit, track the stop loss between the 20- and 50-period volume_Weighted_MA until the hit

Sell ​​(Short) Trade Setup rules

entry

  • The 5 EMA should fall below the 200 EMA
  • The candle should close well below 200 EMA
  • Enter a sell market order at the end of the candle

Stop loss

  • Set the initial stop loss above 200 EMA. or
  • Place the stop loss over the top of the candle

Exit: Trailing Stop Loss

  • Once the trade makes a profit, track the stop loss between the 20- and 50-period volume_Weighted_MA until the hit

Conclusion

Trailing stop losses with VWAPs are usually performed by stock traders. However, some would use a fixed distance to run behind it. Once the caster distance is set, traders cannot take advantage of strong movements with volume. With this method, we can approach price when the faster 20-period VWAP moves with the moment, and avoid coming closer when the moment decreases and the range between the 20- and 50-VWAP narrows.

The setback of this strategy, however, is that in some cases the price would pull deeply towards the 50-period VWAP before bouncing off. This would shake us off the trade. However, this is a compromise for using the 20-period VWAP.

Try this exit strategy with your preferred trend catching strategy. This could allow you to get more profits from an already profitable strategy.


Installation guide for Forex Trading Systems

The VWAP Squeeze Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator (s) and template.

The essence of this forex system is to transform the accumulated historical data and trading signals.

The VWAP Squeeze Forex Trading Strategy offers the opportunity to recognize various peculiarities and patterns in price dynamics that are invisible to the naked eye.

Based on this information, traders can accept further price movements and adapt this system accordingly.

Forex Metatrader 4 trading platform

  • Free $ 30 to start trading immediately
  • No deposit required
  • Your account will be automatically credited
  • No hidden terms

xm no deposit bonus

How do I install the VWAP Squeeze Forex trading strategy?

  • Download VWAP Squeeze Forex Trading Strategy.zip
  • Copy mq4 and ex4 files to your Metatrader directory / Experts / indicators /
  • Copy the tpl file (template) into your Metatrader directory / templates /
  • Start or restart your Metatrader client
  • Choose the chart and time frame in which you want to test your forex system
  • Right-click on your trading chart and move the mouse pointer over "Template".
  • Move right to select the VWAP Squeeze Forex trading strategy
  • You will see that the VWAP Squeeze Forex trading strategy is available on your chart

* Note: Not all forex strategies come with mq4 / ex4 files. Some templates are already integrated in the MT4 indicators of the MetaTrader platform.

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Vwap squeeze forex trading strategy

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