QTY@RISK VWAP based calculationVWAP Volatility-Based Risk Management Calculator for Intraday Trading
Overview
This script is an innovative tool designed to help traders manage risk effectively by calculating position sizes and stop-loss levels using the Volume Weighted Average Price (VWAP) and its standard deviation (StdDev). Unlike traditional methods that rely on time-based calculations, this approach is time-independent within the intraday timeframe, making it particularly useful for traders seeking precision and efficiency.
Key Concepts
VWAP (Volume Weighted Average Price): VWAP is a trading benchmark that represents the average price a security has traded at throughout the day, based on both volume and price. It provides insight into the average price level over a specific period, helping traders understand the market trend.
StdDev (Standard Deviation): In the context of VWAP, the standard deviation measures the volatility around the VWAP. It provides a quantifiable range that traders can use to set stop-loss levels, ensuring they are neither too tight nor too loose.
How the Script Works
1. VWAP Calculation: The script calculates the VWAP continuously as the market trades, integrating both price and volume data.
2. Volatility Measurement: It then computes the standard deviation of the VWAP, giving a measure of market volatility.
3. Stop-Loss Calculation: Using user-defined StdDev factors, the script calculates two stop-loss levels. These levels adjust dynamically based on market conditions, ensuring they remain relevant throughout the trading session.
4. Position Sizing: By incorporating your risk tolerance, the script determines the appropriate position size. This ensures that your maximum loss per trade does not exceed your predefined risk value.
How to Use the Calculator
1. Select Two VWAP StdDev Factors: Choose two standard deviation factors for calculating stop-loss levels. For example, you might choose 0.5 and 0.75 to set conservative and aggressive stop-losses respectively.
2. Set Your Trading Account Size: Enter your total trading capital. For example, $50,000.
3. Maximum Lot Size: Define the maximum number of shares you are willing to trade in a single position. For instance, 200 shares.
4. Risk Value per Trade: Input the maximum amount of money you are willing to risk on a single trade. For instance, $50.
5. Plotting Options: If you wish to visualize the stop-loss levels, enable the plot option and choose the price base for the plot, such as the closing price or the average of the high and low prices (hl2).
Example of Use
1. Initial Setup: After the market opens, wait for at least 15 minutes to ensure the VWAP has stabilized with sufficient volume data.
2. Parameter Configuration: Input your desired parameters into the calculator. For instance:
- VWAP StdDev Factors: 0.5 and 0.75
- Trading Account Size: $50,000
- Maximum Lot Size: 200 shares
- Risk Value per Trade: $50
- Plot Option: On, using "hl2" or "close" as the price base
3. Execution: Based on the inputs, the script calculates the position size and stop-loss levels. If the calculated stop-loss falls within the selected VWAP StdDev range, it will provide you with precise stop-loss prices.
4. Trading: Use the calculated position size and stop-loss levels to execute your trades confidently, knowing that your risk is managed effectively.
Advantages for Traders
- Time Independence: By relying on VWAP and its StdDev, the calculations are not dependent on specific time intervals, making them more adaptable to real-time trading conditions.
- Focus on Strategy: Novice traders can focus more on their trading strategies rather than getting bogged down with complex calculations.
- Dynamic Adjustments: The script adjusts stop-loss levels dynamically based on evolving market conditions, providing more accurate and relevant risk management.
- Flexibility: Traders can tailor the calculator to their risk preferences and trading style by adjusting the StdDev factors and risk parameters.
By incorporating these concepts and using this risk management calculator, traders can enhance their trading efficiency, improve their risk management, and ultimately make more informed trading decisions.
Candlesticksanalysis
CandleStick [TradingFinder] - All Reversal & Trend Patterns🔵 Introduction
"Candlesticks" patterns are used to predict price movements. We have included 5 of the best candlestick patterns that are common and very useful in "technical analysis" in this script to identify them automatically. The most important advantage of this indicator for users is saving time and high precision in identifying patterns.
These patterns are "Pin Bar," "Dark Cloud," "Piercing Line," "3 Inside Bar," and "Engulfing." By using these patterns, you can predict price movements more accurately and therefore make better decisions in your trades.
🔵 How to Use
Pin Bar : This pattern consists of a Candle where "Open Price," "Close Price," "High Price," and "Low Price" form the "Candle Body," and it also has "Long Shadow" and "Short Shadow." In the visual appearance of the Pin Bar pattern, we have a candle body and a pin bar shadow, where the candle body is smaller relative to the shadow.
Just as the candle body plays an important role in analysis, the pin bar shadow can also be influential. The larger the pin bar shadow, the stronger the expectation of a trend reversal.
When a "bearish pin bar" occurs at resistance or the chart ceiling, it can be predicted that the price trend will be downward. Similarly, at support points and the chart floor, a "bullish pin bar" can indicate an upward price movement.
Additionally, patterns like "Hammer," "Shooting Star," "Hanging Man," and "Inverted Hammer" are types of pin bars. Pin bars are formed in two ways: bullish pin bars have a long lower shadow, and bearish pin bars have a long upper shadow. Important: Displaying "Bullish Pin Bar" is labeled "BuPB," and "Bearish Pin Bar" is labeled "BePB."
Dark Cloud : The Dark Cloud pattern is one type of two-candle patterns that occurs at the end of an uptrend. The 2-candle pattern indicates the shape of this pattern, which actually consists of 2 candles, one bullish and one bearish. This pattern indicates a trend reversal and is quite powerful.
The Dark Cloud pattern is seen when, after a bullish candle at the end of an uptrend, a bearish candle opens at a higher level (weakly, equal, or higher) than the closing point of the bullish candle and finally closes at a point approximately in the middle of the previous candle. In this indicator, the Dark Cloud pattern is identified as "Wick" and "Strong" .
The difference between these two lies in the strictness of their conditions. Important: Strong Dark Cloud is labeled "SDC," and Weak Dark Cloud is labeled "WDC."
Piercing Line : The Piercing candlestick pattern consists of 2 candles, the first being bearish and consistent with the previous trend, and the second being bullish. The conditions of the pattern are such that the first candle is bearish and a price gap is created between the two candles upon the opening of the next candle because its opening price is below (weakly equal to or less than) the closing price of the previous candle.
Additionally, its closing price must be at least 50% above the red candle.
This means that the second candle must penetrate at least 50% into the first candle. Important: Strong Piercing Line is labeled "SPL," and Weak Piercing Line is labeled "WPL."
3 Inside Bar (3 Bar Reversal) : The 3 Inside Bar pattern is a reversal pattern. This pattern consists of 3 consecutive candles and can be either bullish or bearish. In the bullish pattern (Inside Up) formed at the end of a downtrend, the last candle must be bullish, and the third candle from the end must be bearish.
Additionally, the close price must be more than 50% of the third candle from the end. In the bearish pattern (Inside Down) formed at the end of an uptrend, the last candle must be bearish, and the third candle from the end must be bullish. Additionally, the close price must be less than 50% of the third candle from the end. Important: Bullish 3 Inside Bar is labeled "Bu3IB," and Bearish 3 Inside Bar is labeled "Be3IB."
Engulfing : The Engulfing candlestick pattern is a reversal pattern and consists of at least two candles, where one of them completely engulfs the body of the previous or following candle due to high volatility.
For this reason, the term "engulfing" is used for this pattern. This pattern occurs when the price body of a candle encompasses one or more candles before it. Engulfing candles can be bullish or bearish. Bullish Engulfing forms as a reversal candle at the end of a downtrend.
Bullish Engulfing indicates strong buying power and signals the beginning of an uptrend. This pattern is a bullish candle with a long upward body that completely covers the downward body before it. Bearish Engulfing, as a reversal pattern, is a long bearish candle that engulfs the upward candle before it.
Bearish Engulfing forms at the end of an uptrend and indicates the pressure of new sellers and their strong power. Additionally, forming this pattern at resistance levels and the absence of a lower shadow increases its credibility. Important: Bullish Engulfing is labeled "BuE," and Bearish Engulfing is labeled "BeE."
🔵 Settings
This section, you can use the buttons "Show Pin Bar," "Show Dark Cloud," "Show Piercing Line," "Show 3 Inside Bar," and "Show Engulfing" to enable or disable the display of each of these candlestick patterns.
