It is likely best to use a spreadsheet program to track the data if you are doing this manually. A spread sheet can be easily set up.
|Figure 1: Spreadsheet Headings|
|Source: Microsoft Excel|
The appropriate calculations would need to be inputted.
Attaining the MVWAP is quite simple after VWAP has been calculated. A MVWAP is basically an average of the VWAP values. VWAP is only calculated each day, but MVWAP can move from day to day because it is an average of an average. This provides longer-term traders with a moving average volume weighted price.
|Figure 2: SLV with MVWAP (20) and VWAP in trending market, 10 minute chart|
The indicators also provide tradable information in ranging market environments.
|Figure 3. SLV with MVWAP (20) and VWAP in ranging market, 10 minute chart|
On ranging days traders can buy as price crosses above VWAP/MVWAP and sell as price crosses below VWAP/MVWAP for quick trades. This method runs the risk of being caught in whipsaw action.
Alternatively a trader can use other indicators, including support and resistance, to attempt to buy when the price is below the VWAP and MWAP and sell when the price is above the two indicators.
At the end of the day, if securities were bought below the VWAP, the price attained is better than average. If the security was sold above the VWAP, it was a better than average sale price.
MVWAP and VWAP are useful indicators that have some differences between them. MVWAP can be customized and provides a value which transitions from day to day. VWAP, on the other hand, provides the volume average price of the day, but will start fresh each day. MVWAP can be used to smooth data and reduce market noise, or tweaked to be more responsive to price changes. If a trader sells above the daily VWAP, he gets a better than average sale price. If he buys below the VWAP, he gets a better than average purchase price. On trending days, attempting to capture pullbacks towards the VWAP and MVWAP can produce profitable result if the trend continues. (For related reading, also take a look at Pinpoint Winning Trade Entries With Filters And Triggers.)
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