Welcome everyone! As we discussed in the last lesson about the RSI indicator, today we are going to explore some other essential indicators that you should be familiar with. These are commonly used in the market, and we'll discuss how they work and how to apply them in your trading strategy.
VVap (Volume Weighted Average Price)
The first indicator we’ll dive into is VVap (Volume Weighted Average Price). Let's break it down:
- Volume – Refers to the amount of trading activity happening.
- Weighted Average Price – This is the average price calculated, but adjusted for the volume of trades at each price level.
What does this mean? It essentially tells you the average price at which an asset is being traded, considering the volume at each price point. The VVap line you see on the chart represents this average price.
In Reliance charts, you can apply this indicator to individual stocks or futures, as VVap is not applicable to indices like Nifty or Bank Nifty directly, because these indices do not involve direct trading on the spot market. When trading Nifty or Bank Nifty, you are generally trading options or futures, not the underlying spot itself.
How VVap Works
- Above VVap Line: If the price is above the VVap line, it indicates a bullish trend, and you should consider buying.
- Below VVap Line: If the price is below the VVap line, it signals a bearish trend, suggesting you should consider selling or taking short positions.
This line also acts like a support or resistance. For example:
- When the price breaks above VVap, it might be a breakout, suggesting a potential upward move.
- When the price is below VVap, it may act as resistance to upward movement.
How to Use VVap
Trade Only Intraday: VVap is primarily an intraday indicator and should be used on smaller time frames like 1-minute, 3-minute, 5-minute, or 15-minute charts. Anything above 15 minutes is not recommended.
Basic Rule: Never buy below the VVap line, and never sell above the VVap line. This is a simple thumb rule for intraday trading.
You can plot the VVap on any chart by selecting the "Studies" option and typing in "VVap." Once added, it will show up on your chart, and you can apply the above logic to make informed decisions.
MACD (Moving Average Convergence Divergence)
Now, let’s move on to the MACD indicator. The full form of MACD is Moving Average Convergence Divergence. This indicator helps you understand the relationship between two moving averages and provides insights into the momentum of the market.
Key Components of MACD:
- MACD Line (Black Line): This is the difference between a fast-moving average and a slow-moving average.
- Signal Line (Red Line): This is a slower line that helps to generate signals when the MACD line crosses it.
How MACD Works
- Bullish Signal: When the MACD line crosses above the signal line, it indicates a potential buy signal (market is becoming bullish).
- Bearish Signal: When the MACD line crosses below the signal line, it signals a potential sell or short (market is bearish).
Even though MACD is a lagging indicator (meaning it gives signals after the price action has started), it helps in confirming the ongoing momentum.
- Large Gap Between MACD and Signal Line: A larger gap indicates a stronger trend and potential for bigger price moves.
- Smaller Gap Between Lines: A smaller gap typically indicates less momentum and a smaller potential move.
How to Use MACD
Crossovers: The primary trading signal from the MACD is the crossover of the MACD line and the signal line. A crossover to the upside suggests a bullish trend and vice versa for a bearish trend.
Histogram: Along with the two lines, the MACD also provides a histogram (green and red bars). The green bars represent increasing momentum to the upside, while red bars show that the market is shifting towards the downside.
Example of MACD in Action
Let’s say you see the MACD line crossing above the signal line on a 5-minute chart. This could be your cue to enter a long position. However, remember that the signal is lagging, so the market might already have begun its move.
On a larger time frame (like 1 hour), the crossover could indicate a stronger, more sustained move. In a smaller time frame, the market might experience a quick pullback after a crossover.
Final Thoughts
Both VVap and MACD are simple yet powerful indicators when used correctly. They are especially helpful for intraday trading, where you’re focused on catching short-term trends.
- VVap helps you identify the market’s overall momentum based on volume and price, making it useful for support and resistance levels.
- MACD helps you spot potential trend reversals and confirms the strength of the momentum with its crossovers.
By incorporating these tools into your strategy, you’ll be better equipped to make informed decisions and improve your trading outcomes.
In our next lesson, we’ll go deeper into Moving Averages and explore how they can be combined with these indicators for even more powerful trading strategies.
Hope this lesson helps clarify how to use VVap and MACD! Happy trading!
This works so brilliantly that I’ll show you on this chart itself—on multiple charts. Look here: it's exiting at a perfectly level point, entering at the perfect level, and it works even in small ranges. Sometimes, it catches huge trends and big targets too. You might think that if I mark the levels quickly, I’ll catch only small trades, but these points help you catch both big trends and small moves. Look here, exactly at the top—perfectly. It works incredibly well.
Now, we’ve seen this on Nifty. Let’s see how it works on Nifty when the levels are not clear. This indicator also shows future levels in advance, not just where the market has already been, but also where it might go. It’ll tell you where the market could potentially face resistance or support in the future.
Let me show you on TradingView, where I’ve marked the trendlines. Look at these points; I’m showing you this on TradingView because I’ve already marked the trendlines there. Here’s the Nifty chart with pivot points. Now, what’s happening here is that the pivot level is indicating resistance above and support below—basically, it's showing you the support and resistance levels.
Sometimes, this indicator helps catch huge targets, like when it helps you catch a trend from start to finish, like the complete trade from here to here. It’s not just catching trends in small ranges, it also shows you when a support level holds, like a bounce-back from a fall. It works beautifully, guiding you to the future levels.
Let’s zoom in a bit so you can see it better. Now you can see it clearly. This is a 5-minute chart, and the levels are clearly visible. And the best part is, it works across all timeframes.
Now, let me show you on a larger timeframe. Let’s go from the 5-minute chart to the daily timeframe on Nifty. See, here it was stuck in a range, and this pivot point was showing both small levels and huge levels. When the breakout happens, it catches a significant target, showing you exactly where the market will reverse or continue. For example, from 16,500 to 17,300 points—that’s a big move that this tool helps you capture.
This is a self-generated level indicator that removes the need for manual work. It’s truly remarkable because it generates the levels for you. You don’t have to keep marking them yourself.
It works excellently in intraday trading, position trading, and across all timeframes—5 minutes, 15 minutes, hourly, and even on the daily chart. It tells you different levels for each timeframe, and it works incredibly well.
Let’s look at how to trade with it. First, you can use the support and resistance levels to figure out your exit points. For example, if you enter a short trade, it will help you figure out where to exit. Secondly, you can trade on breakouts. When a resistance level breaks, you trade until the next level. How do you get confirmation? If a green candle forms and the next candle breaks its high, you’ve got confirmation for an upside move. Similarly, if a red candle forms and the next candle breaks its low, you get confirmation for a downside move. This helps you follow trends effectively, knowing exactly where to enter and exit.
It’s a fantastic tool that I personally use. Whether it’s Nifty, Bank Nifty, or individual stocks, this indicator will generate the levels for you. Make sure to mark these levels and use them; it’s an extremely valuable tool.
We’ve now covered multiple indicators, and you can create your own setup by combining them in different ways. We’ve studied each indicator individually, so now you can create your own setup. Pivot points are something you should definitely use, as they will help you with identifying levels when you’re unsure. Use them when you need help.
It’s an incredible tool, and it works so well. You’ll see the difference when you use it. I hope these indicators are clear to you now.
With that, the class on indicators is over. In the next video, we’ll dive into specific strategies. Be sure to backtest and practice these concepts. So, I’ll see you in the next video, where we’ll go deeper into strategies and how to implement them successfully.
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