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While VWAP should technically be an average at the level of single trades, as a practical matter I think it is usually computed by taking fairly small time intervals (such as the 1-minute data you mentioned), often averaging something like OHLC to get a more representative price, and basically using that as your price and the volume of the bar in your calculation. This means it's not exactly an "average trade," but the question is whether it is a close enough approximation.
I recall reading something like that in @Fat Tails' NT version of the indicator, although the details temporarily escape me. Approximating the calculation this way would be good enough, at least it seems so to me.
A multi-day VWAP -- say, a weekly VWAP -- would not compute the separate VWAPs for each day, which I think is what you are saying, but would just run the weighted average for the underlying bar series straight through beginning on Monday and ending on Friday, then start over on Monday again.
I don't know if I understood you, but I don't think you would need to calculate individual days' VWAPs. Perhaps I missed your point.
If you wanted to do a 10-year VWAP you would need a rougher approximation than 1-minute bars unless you wanted to be overwhelmed by the volume of computations. But if you're using a large timeframe you can have a large allowance, I would say.
I'm not sure I quite got you point. Does this address it or am I simply confused about what you said?
Bob.
Can you help answer these questions from other members on NexusFi?
Anchoring a VWAP at market turns makes much more sense as others have mentioned. The buy/sell group responsible for turning the market usually defends the VWAP levels.
I have tried to anchor it at market pullback to mixed results. It does give a good picture of a tiring trend though.
Also, I have seen people use it as a trade evaluation at eod, by anchoring it at entry price.
Great points everyone.
Cheers.
Average variance between the Session Mid and VWAP for ES RTH 2015. Difference calculated each 1min for the duration of the session.
Mid being the rolling (Session High - Session Low) / 2
VWAP based on tick data
I wanted to see if there was any …
It looked at ES RTH difference between Session Mid and VWAP; 75% of the time it is less than 4ticks difference, 97% is less than 3pts difference. (this was for 2015)
It's not making a conclusion in any direction, but you could perhaps go further and look into times where VWAP is extended away from Mid, what does this mean, etc..
But in the discussion of execution, you could for all purposes just look at above/below session Mid and be mostly the same as VWAP for execution performance.
To clarify I think VWAP would be like the ultimate daily pivot calculation hence why I would like to be able to use it. When I say 20 day average of the VWAP I specifically mean average(Daily VWAP, 20) and not a VWAP calculation over 20 days. When I talk about 10 years of data, I don't want a 10 year VWAP calculation, I would like 10 years of data with daily OHLC AND daily VWAP. (Be interesting to feed daily VWAP into machine learning algos).
Ah, OK now I got it. A completely different idea, to use the daily final VWAP as an input for an average of x days.
I can see how this would be useful. A little complicated to figure, because you'd have to run the VWAP calculation for each day and store the values, then take the average.
Light slowly dawns....
Bob.
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Edit: Now I get this part too:
It would be a lot simpler if they just did that, so you could just grab them up. It is strange they don't... I guess you've checked for it, but are you sure? Seems like a simple, basic statistic that should just be there.