How day traders use VWAP when markets are chaotic

Key Concepts

• VWAP (Volume Weighted Average Price): An average market price weighted by volume, indicating institutional order flow and potential price tipping points.
• Faux Show Bro: A trading setup involving a fakeout, shakeout, and subsequent breakout above VWAP, signaling a potential trend change.
• Anchored VWAP: VWAP calculated over a specific, longer timeframe (e.g., three months, year-to-date) rather than intraday.
• Gold/Silver Ratio: A metric comparing the price of gold to silver, currently at 51, indicating silver is rapidly appreciating.
• Institutional Order Flow: The buying and selling activity of large institutional investors.
• Bullion Trade: The buying and selling of precious metals like gold and silver.

Market Overview & Kenny Glick’s Perspective

The episode features Kenny Glick, a day and swing trader known as “The Warlock,” discussing current market conditions and his trading strategies. Glick expresses a bearish outlook, noting recent weakness in bank stocks (JP Morgan, Citibank) and a potential temporary top in the market. He emphasizes being “liquid” – holding cash – and ready to capitalize on potential downside moves. He observes that the QQQ (Nasdaq 100) hasn’t reached new all-time highs, unlike the S&P 500 and Russell 2000, suggesting underlying market concerns. He states, “You can never say the top is in…there is no spoon,” highlighting the uncertainty inherent in market timing.

VWAP Deep Dive: Theory & Application

The core of the discussion revolves around VWAP. It’s defined as a “fair price snapshot” reflecting where actual buying and selling occurred, weighted by volume. Glick views VWAP not just as an indicator, but as a way to understand institutional order flow, stating it’s “like institutional orderflow.” He emphasizes that traders are “insignificant fleas” compared to institutions and should focus on identifying their moves.

Glick’s methodology involves analyzing VWAP on multiple timeframes: today’s VWAP, the prior day’s VWAP, and a longer-term VWAP (e.g., three months, since the last earnings report). He believes breaking through multiple VWAP levels (today and prior day) has a 90% chance of initiating a trend for the day. He stresses that VWAP provides defined entry and exit points, limiting risk. He’s been using VWAP “exclusively since 2012” and finds it consistently valuable. Brian Shannon is noted as a key figure in VWAP analysis.

The “Faux Show Bro” Setup: A Proprietary Strategy

Glick details his proprietary trading setup, “Faux Show Bro” (fakeout, shakeout, breakout). This involves identifying a dip that shakes out weak hands, followed by a price snapback and a breakout above VWAP. He explains that this pattern often occurs when shorts are encouraged to enter a position, only to be forced to cover as the price reverses. The “faux show” and “shakeout” areas serve as stop-loss levels. He notes this setup has been successful since the 1990s and is even more effective when overlaid with VWAP analysis. He emphasizes that accepting losses is crucial for success with this strategy.

Silver & Gold: Bullion Trade Analysis

The episode touches on the gold-to-silver ratio, currently at 51, the lowest level in over a decade. This indicates silver is rapidly appreciating relative to gold. Glick is bullish on silver, citing a 30-year wait for this moment. He believes stabilizing between $70-$80 could lead to further gains, potentially reaching $120, $180, and even $250. He acknowledges the risk of a parabolic move attracting short sellers but believes the long-term fundamentals support continued silver appreciation. He personally invests in silver bullion monthly.

Risk Management & Trading Advice

Glick advises new traders to not quit their day jobs and to focus on learning and gaining experience. He offers free trials of his trading room and encourages observation of VWAP’s behavior across multiple timeframes. He emphasizes the importance of defined risk management, using prior highs as exit points when shorting at VWAP. He highlights the value of identifying high-volume stocks, particularly those reporting earnings, as these offer the best opportunities for VWAP-based trading. He stresses that the market is designed to make traders lose money and that discipline and acceptance of losses are essential.

IPO Strategy & Market Observations

Glick generally avoids IPOs, viewing them as liquidity events for insiders. He prefers to wait for IPOs to break their initial trading range and establish a clear trend, often looking for a “faux show bro” pattern. He notes success with stocks like ARM and ALAB after they initially declined.

Notable Quotes

• “You can never say the top is in…there is no spoon.” – Kenny Glick, emphasizing market uncertainty.
• “VWAP saved my life. Especially as a shorter.” – Kenny Glick, highlighting the risk management benefits of VWAP.
• “The market is trying to shake you off the bat. It's trying to get you off. It's like a bucking bronco.” – Kenny Glick, describing the challenges of trading.
• “If you get the fake them out, shake them out, and then you're breaking back over the VWAP, most of the time that trends is changing.” – Kenny Glick, explaining the Faux Show Bro setup.

Technical Terms

• DRNZ: An ETF (Exchange Traded Fund) focused on drones (REX Shares Drone Industry ETF).
• Bullion: Physical gold, silver, or other precious metals.
• Parabolic Move: A rapid and sustained price increase.
• Short Squeeze: A situation where short sellers are forced to cover their positions, driving the price higher.
• Liquidity Event: An event that allows investors to sell their holdings for cash.

Logical Connections

The episode flows logically from a general market overview to a detailed exploration of VWAP and its application in Glick’s trading strategies. The discussion of the gold/silver ratio provides a broader context for potential investment opportunities. The advice to new traders and the discussion of risk management tie together the technical analysis with practical trading considerations. The “Faux Show Bro” setup is presented as a concrete example of how to utilize VWAP in a specific trading scenario.

Conclusion

This episode provides a deep dive into Kenny Glick’s trading philosophy, centered around the use of VWAP and his proprietary “Faux Show Bro” setup. The key takeaway is that understanding institutional order flow, utilizing multiple timeframes, and implementing disciplined risk management are crucial for success in day trading. The discussion also highlights the potential opportunities in the silver market and the importance of adapting to changing market conditions. The episode emphasizes that while trading can be profitable, it requires dedication, discipline, and a willingness to accept losses.