Powerful VWAP Indicator Strategy for Binary Options

Wednesday, March 22nd, 2017 by Tim Lanoue

Wow has it been quite a bit of time since I have written an educational investment article for Michael Freeman and binary options! I can honestly say that I am happy to be back and let’s get back into the swing of things!  Today I have this updated version of my previously published VWAP Indicator and Strategy from a little over 2 1/2 years ago made available after receiving over 20 requests to have an updated version of this article to be completed. So what do you need to get started?  Well, first and foremost since this is a technical analysis based trading strategy access to a charting solution is absolutely essential!

OptionRobot

Strategy Requirements

A few charting solutions that you could consider using would be FreeStockCharts.com, MetaTrader4 and MetaTrader5. Also, access to a Free Demo Account is encouraged so you can practice this strategy prior to implementing it in a live investment situation. Moving forward, all of the images provided to you below are taken from the FreeStockCharts charting solution and are meant to help you better understand the concept and executing process of this software.

Strategy Set-Up

So once you have your charting solution up and running, you should select up to 5 different assets in different tabs to use with this strategy. Typically I encourage traders to get started with low volatility currency pairs such as the Eur/Usd, Usd/Cad, Nzd/Usd and Usd/Chf. Other assets you could consider investing with would be high volume stocks such as Apple, Facebook, Exxon, Google and Amazon. These assets are less prone to change directions due to minor fluctuations that may occur in the financial markets which ultimately mean they are more reliable for you to invest with.

Now, there are two technical indicators that we use when investing with this strategy which would be the Moving Average and the VWAP (Volume Weighted Average Price) indicator. The main function of the Moving Average technical indicator would be to help filter out the “noise” from random price fluctuations and serves as a trend following indicator. This indicator is extremely effective when used with trend trading or when used in combination with the VWAP indicator which effectively identifies powerful short-term market reversals.

VWAP indicator customization

Now that you have your targeted assets of choice and your indicators incorporated into your charting solution, the next step you need to complete would be to make sure that the time frame of each chart is set to a period of 5 minutes. Once you have completed that step, the next step that you need to fulfill would be to edit your Moving Average indicator so that the Average Type reflected is showcased as Simple. If you right-click your mouse while hovering over the Moving Average indicator, you should see this option made available to you then the other alteration that you do would be to make sure that the period is set to 4.

VWAP indicator customization

In case some of you were wondering the numerical period value that you set your Moving Average to will showcase the number of days that the indicator reflects. So if you were to set the period to 10 it would reflect a period of 10 days but with it being 4 with this strategy we are seeing the average price period of that asset over the past four days. No customizations are necessary with the VWAP indicator but if you want to change the Line Style to dotted you can, typically it is a line but I prefer dotted just to change things up once and awhile!

Applying The Strategy

The signaling process with this strategy is simple and relatively straightforward. If our VWAP indicator crosses our Simple Moving Average indicator in a downward direction then we go ahead and place a short-term PUT investment with an expiration between 3 to 10 minutes. However, if our VWAP indicator was to cross our Moving Average indicator in an upward cross then we go ahead and place a CALL trade with an expiration time between 3 to 10 minutes.

VWAP Strategy

Now, if you want to filter out signals, you can wait for a confirmation candle to appear next to the cross to signify that a reversal is in fact in play although you can only apply this confirmation if you are planning on trading an investment with an expiry close to 10 minutes. Otherwise if you wait too long and place a more short-term trade, you may completely miss the signal while you were waiting for the candle to close. (A confirmation candle for a PUT trade set up would be a bearish candle and vice versa for a CALL trade set up).

VWAP Strategy

Strategy Tips

  1. Try to invest like assets with correlating market hours. Meaning that if you are trading the Usd/Cad for example make sure that you are using this strategy during the New York Stock Exchange. Or if you are trading the Eur/Jpy, try to only invest that currency pair during the late Sydney and throughout the Tokyo trading session.
  2. Try to take 10 minute breaks before and 15 minutes breaks after a major press release has been released. A free online economic calendar has been provided to you below for simplicity and to make things easier on you.  Any press release with a bull symbol of 2 or 3 is when we apply this tip!
  3. Try tweaking some of the indicator settings to smaller or large values if you want to test this strategy with different time frames and expiration periods. Make sure you change the Moving Average Period, the time frame of your charts along with your expiry times before applying these customizations in a live investment mode. Make sure to practice on a Free Demo Account first though!

Effective Strategy & Software Combos

Although this strategy is quite effective on its own, I have noticed pretty accurate results when using this strategy to serve as a signal confirmation for the OptionRobot Software. Just make sure to use the software in a manual investment mode like I do, wait for a solid entry rates and let the strategy filter out and do the rest of work. You see, one of the nice advantages about this strategy would be that it is simple and generates a high volume of signals so you don’t have to spend much time in front of your computer just to get your trades in. Below are my most recent results with this strategy and OptionRobot combo!

VWAP Strategy - OptionRobot

After several requests and inquiries about possibly having a wide number of my strategies put into a downloadable software format I have successfully begun to work on just that! So if you want to be able to use this strategy and have the software just do all the work for you in the form of a downloadable charting solution like MetaTrader 4, please leave a comment below and we will share more about this opportunity. A sign up with a regulated binary options or Fore broker will more than likely be a requirement but just know you are safe with a regulated broker and with these proven strategies!

VWAP Strategy - Invest.com

Above are my results with Invest.com, a new Forex and CFD (Contracts-For-Difference) broker that offers amazing trading features, stop-loss features and a style of Forex trading that is much like binary options. To get a free demo account with them, check out Invest.com Free Demo Account!

VWAP Strategy Conclusion

The best advantage about this strategy would be how user-friendly and simple this strategy is to apply in a live investment scenario. One of my main goals when I provide you guys educational and informative articles would be to provide it to you in an easy-to-read and understandable manner which are among one of the many goals I strive for. Make sure to follow all of the tips above, only invest with regulated online trading brokers that are legal where you reside and leave any questions or your feedback below in a comment!

When investing online with binary options or Forex it is imperative that you invest with only regulated binary option or Forex brokers. Due to the large number of fraudulent trading operations and crooked trading brokers I only encourage you to sign up with regulated brokers!

If you need help finding a regulated broker you can always contact Mike by leaving a comment below and I know he will be more than willing to help you out! I have been asked to stay as well due to the demand of strategies and educational articles so if you would like to learn about a specific investing topic or have any educational topics you want covered, feel free to leave your feedback and requests below!

25 thoughts on “Powerful VWAP Indicator Strategy for Binary Options”

  1. Good article and very interesting. Still relatively new in this area, but trying different strategies and using signals from Mike’s group in NADEX demo account and doing pretty good. Will try this but would also like to be included on your list for any software developed. Thanks.

  2. Dear Tim,

    Yes, when you complete your strategy software , please let me know! I downloaded the VWAP, but there are so many different kinds (high low, close, open) and I am not able to download freestockcharts either. Thank you so much.

    Kind regards
    Angelika

    1. Hey Peter,

      Great results Peter!
      A 80% success rate is even a little bit better than what I do so I’m glad to hear it!
      Keep up the good work and have a great rest of your week!
      Thank you for your feedback!
      ——-
      Hej Peter,

      Stora resultat Peter!
      En 80% framgång är ännu lite bättre än vad jag gör så jag är glad att höra det!
      Håll upp det goda arbetet och har en stor resten av veckan!
      Tack för din feedback!

      Tim Lanoue

  3. Hi Tim, Glad your back. Seems like I just heard about you and followed you awhile then you were gone. You sound excited about your new project and I would like to be a part of it. Sign me up. Thanks

  4. A very informative post. I like the fact that within this strategy you have mentioned the importance of having regular short breaks (of up to 10 mins) as so many of us traders forget about the importance of taking mental time out to recharge the battery.
    What I am a bit confused about however with this strategy is that you recommend trading different assets from currencies to shares. Whilst this would work in theory, one needs to be familiar with the undertaking of this as trading shares is very different from trading currencies.
    A good article nonetheless. Thanks for sharing this strategy.

    1. Hey Warren,

      Excellent to hear! It shouldn’t be too difficult to accomplish so I’ll make sure to notify you when the project has been completed! Feel free in the meantime to try this strategy out, tweak some of the indicators if you like and practice it on a demo account if you want! The more practice you have with applying technical analysis the better off you will be when investing online!

      Have a great rest of your weekend and take care!

      Tim Lanoue

    1. Hey Janet,

      No customization is required for the VWAP as mentioned above, the Moving Average is the indicator that we change to a Period of 4 and to Simple. The numerical value that you set your period too is the number of days that the average price of the asset reflects. So in this instance the SMA (Simple Moving Average) is reflecting an average price range over the past four days.

      Hope this helps you out and have a great rest of your weekend!

      Tim Lanoue

    1. Hey Innocent Tsamwisi,

      That is excellent to hear, I will probably start developing the software with this strategy automatically incorporated with it at the start of April! Shouldn’t take me too long to figure it out and to back-test it but I am glad to hear you are interested and I hope this strategy has proven useful to you throughout the past year. Although the strategy may be an “oldie” it is a good one still! Have a great rest of your weekend!

      Tim Lanoue

  5. Hey Tim,
    I have been following you on OBO for some time and would be interested in the software for this strategy..I appreciate how you manage to keep things simple to understand.. As a US trader would this work on NADEX? Or suggestions for another reliable broker..
    Thanks,Dennis

    1. Hello Dennis,

      I hope you have benefit from some of the articles that I have had published on OBO Dennis!
      I know there are a good number of free educational articles on both so hopefully you have taken advantage of those publications. I am glad that I can break down topics and provide it to you guys in an easy to understand concept, I know how difficult it is when you are trying to get started with new strategies when just starting out.

      Absolutely, you may need to tweak some of the indicators to get it to work best with Nadex if you are trying to do it more medium to long-term but yes you can apply this strategy with Nadex. It is refreshing to hear that you are from the US and using Nadex as well since they are CFTC Regulated. Happy to know you got started with a good, regulated broker and you should do quite well! I know Nadex offers a free demo account as well so make sure to practice, practice and practice some more before you apply this strategy in a live investment situation!

      Have a great rest of your weekend!

      Tim Lanoue

      1. Thanks Tim,
        I have MT4 loaded on a demo account with a signal service. Are the indicators in your article Moving avg.and VWAP included on their indicators list and is this similar to the 60 second price action strategy you talked about?

        Dennis

        1. Hey Dennis,

          At the moment I do not have MT4 or MT5 on my operating system.
          I prefer to use FreeStockCharts.com, this charting solution has all the indicators you could wish for and the indicators used in this investment strategy. Maybe look for “Moving Average,” “M.A.,” “Simple Moving Average,” “S.M.A.,” “VWAP,” or “Volume Weighted Average Price.”

          The 60 Second PATS is similar to this strategy in the concept that it is used to generate and execute reversal signals. Although the time frames are different and this strategy relies on the incorporation of technical indicators whereas PATS does not would be among the chief differences between these two strategies. I would recommend testing out both of these strategies, of course on a demo account first, then you can use both while day-trading.

          Hope this helps you out some and have a great rest of your week!

          Tim Lanoue

          1. HI Tim, I cant seem to download a VWAP can you use a MA Weighted instead but at what period?? thanks

        2. Hey Janet,

          What charting solution are you using?
          MT4 does not appear to have the VWAP indicator.
          Have you tried using Freestockcharts.com?

          Have a great rest of your week!

          Tim Lanoue

          1. I can’t seem to download free stocks chart so I use either trading view or meta4 I use MA at 4 and put the vwap at 1 and a 5 mins time frames and it’d worked quite well on a demo don’t no what be like on real acc??

  6. Hi
    I have been following your various posts on scam companies and as a complete newbie I was wondering if you could recommend who I can start with who has a good reputation and is user friendly towards newbies. Can you also recommend a regulated and legitimate broker. I am based in the UK

    1. Hey Peter,

      Glad to hear you have been following my scam posts, it is really disheartening to know how dangerous the binary options industry truly is and more scams are flooding the online marketplace than ever before which is just destroying the reputation of binary options. So I really hope the articles that I have had published have helped you out and even saved you from a few scams!

      With you residing within the UK you can consider yourself lucky to be honest, you have the “cream” of the crops to work with regarding binary option brokers. Meaning you have the most REGULATED broker option brokers for you to sign up with. One rule of thumb to always remember would be to ONLY sign up with regulated brokers! I know 24Options that is reviewed here is a regulated and highly regarded broker among UK traders for the past few years.

      I would check out that review at: http://www.binaryoptionschannel.com/binary-options-broker-reviews/24option-review-2/. If you need any additional help with strategies or trading in general feel free to email me at binarytradingonline@gmail.com, or leave a comment below.

      Hope you have a great rest of your weekend!

      Tim Lanoue

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