Developing A Trading Plan – Part 2

Time periods and tools used: VWAP / Volume Profile

In part 1, I talked about the importance of doing post market analysis.  Through this homework, I can see factually how market logic played out using my tools. I also talked about doing pre-market preparation.  Pre-market prep is important because this is where I must use what happened (homework) to develop a plan of where the key reference levels are and plan what to do there; buy, sell or monitor for more insight, or look for follow through.

My post market homework and pre-market preparation I must consistently use the following tools:

  • Vwap with it’s standard deviation levels.  These levels produce the value area highs and lows.  There are 6 key levels:
    developing Vwap / VAH / VAL, and the fixed Vwap / VAH / VAL.

    • With in the VWAP levels I must be mindful whether price is inside or outside of value for both the developing and fixed value areas.
  • Volume profile with strong attention to the VPOC, the extremes, low and high volume areas.

*I will focus on using the VWAP and Profile tools on the day and week time frames.

  • The previous days and weeks high, lows, and open.
  • Fib retracement and extension levels for the previous day, week, and impulse legs with in these periods.

At times, I will look at the Cumulative Delta and use trend lines to help further read, interpret, and understand what is happening on the charts.  Though the drawing of trend lines should be done during post market home work and pre market preparation so that these levels are already available during trading hours.

Included equally in my analysis is the daily candlestick bars and the activity on this chart.  Here I will use the 5,10, and 21 EMA lines.  I will identify bracket balanced areas.  This chart will be the starting point for everything I do.

In addition, I must be aware of the activity higher time frame charts like the weekly and monthly bars.  On these charts I will also look at VWAP and Profiles but must understand that I am not trading on these levels.  They are only to be used as guides to see the whole market and bigger picture.  They can also be used to evaluate the boundary limits of moves starting intraday.