This past week has been a classic sideways trading range, providing many good solid opportunities for relatively low risk, and potentially high reward trades. The chart below shows the US stock-market (S&P500) futures contract for the week commending 23rd September. The lines surrounding the price action are the VWAP (in pink), surrounded by its standard deviation lines.
The most striking characteristic of the week, is the horizontal nature of the VWAP and it’s corresponding standard deviations. This illustrates how the trading action for the week has been sideways, with action either side of its mean. In this type of market the best opportunities are at the outer bands. Illustradted here by the green (bottom) and red (top) VWAP standard deviation bands.
The biggest action of the week came on Friday, with the announcement that the US may be considering removing Chinese companies from their stock-exchanges. This saw a hared sell-off in after noon trading (UK time). The sell-off took us to the bottom outer VWAP band green (and yellow), where the market subsequently bounced. Although not easy to trade, it was clear than when the market began to sell hard, that the green/yellow VWAP bands were potential targets. Equally when the market reached those bands, there was a reasonable chance of a bounce.
AS with all trading, looking at a chart after the event is far easier than trading it live. However, it is these types of setups that can be learned and practiced in order to be traded effectively in the future.