2016-03-31: Mid-Day Review: VWAP was the trap


I’m sure that today with price bouncing 3 times out of VWAP there has been a lot of traders who felt in love with it. Such a reliable indicator! And it is, but for too many people… and in the markets when the herd follows a trend, the big guys know how to profit.

In the chart (4,500 ticks for ES) you can see how price has bounced 3 times right at the VWAP level (from the XBP VWAP indicator). This strong resistance must have encouraged a lot of traders to go Long and place their stops behind “the VWAP wall”.

Big Money traders know this fact and they plan to profit from it. They slowly but steady let the market go up, they even push it up with those green bars the begining of the session. Then, they decide to enter the market at the very top, as you can see by those cyan bars, from the XBP Tape Players indicator, that highlight the unusual high volume entering the market.

The XBP Bulls and Bears Support and Resistance indicator then prints a resistance, indicating you that the big money players entered short. You can bet now that they are going to cross that VWAP level and hit those stops.

Do you want to know where those stops were? Easy! Just drop one time frame lower, to 1,500 ticks and there you will see it very clear:


VWAP level was around 2056, and you can see very clear that the unusual high volume occurs just 2 points below, at 2054. The cyan bar comes together with two high tape speed bars, from the XBP Tape Speed indicator. This increase in speed is typical of stops being hit as they are all grouped together.

I hope that with today’s action you realize how the XBP indicators help you to see the behind the scenes action, so you can profit from it. Remember always to wait to see the action and then trade: “Trade what you see, not what you think”.

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