As we find ourselves in the midst of a brutal bear market in 2022, it may be a good exercise to study the past in order to be better educated on what...
18 min read
John McDowell : July 23, 2021
Last Updated: June 7, 2022
As Lead Content Strategist, John diligently searches for ways to connect with day traders and provides training and education to those in this space.
VWAP Boulevard has become all the rage in the fintwit community lately. Discovered, named, and taken mainstream by Twitter phenom @team3dstocks, thousands of day traders are now implementing this strategy to trade momentum stocks. In this post, we’ll uncover the long and short of the strategy, plus offer a few helpful real-life vwap boulevard trading examples.
As a primer to the content below, watch this quick YouTube tutorial where we use our VWAP Boulevard drawing tool in TradingSim to practice this strategy!
With any good strategy, an edge in the market starts with backtesting. You can either pay for the data and analyze it, or you can spend years collecting your own data as you trade.
Fintwit personality @team3dstocks, who goes by AllDayFaders, is the man who discovered the vwap boulevard strategy through years of collecting his own datasets.
to be honest there's nothing special about it. u'd have the exact same understanding of the game if you poured in the same amount of time that i did. I was OBSESSED with trying to master all day faders. it used to consume my entire day. Put in the time = u'll get the same results https://t.co/u9paD18Dff— AllDayFaders (@team3dstocks) April 15, 2021
Reading his Twitter posts are lot like getting a noogie from the uncle whose standards you know you can’t live up to. It hurts, the delivery’s a little crass, but you know it’s all true.
Other times, he’s like the older brother or dad you want to imitate. The successful one, giving you the advice you know you need to hear.
Ultimately, he’s very active and benevolent in the daytrading world, doling out his nuggets of wisdom only at the expense of your ego. So be sure to frame your questions wisely, he’s backed up 6 months in responding to his DMs.
Questions to ask urself when tracking data:— AllDayFaders (@team3dstocks) April 9, 2021
✅how often does this setup occur
✅at what time does it usually occur
✅what is the avg range
✅what signal/indicator usually marks the top/bottom of this setup
✅what are the fundamentals usually like on this setup?#BearTipOfTheDay
In truth, a lot of his posts, especially the #beartipoftheday, can be very helpful and encouraging to anyone striving to be a consistent trader:
When asked how he finally stumbled upon the strategy, he says “each time a low float ticker had the audacity to hit the scanners, I would add it to my database, then pick it apart after hours.”
“Like a mad scientist,” he goes on to say.
Excel spreadsheets galore. He’d break everything down that he possibly could, “analyze EVERYTHING” about the tickers he saw on the screen.
What is EVERYTHING, you’re wondering?
“The chart, the price action, the SEC filings, the fundamentals, the volume, etc.”
After years of analysis, it eventually led him to the highest volume days on small cap stocks. These securities that had been selling off or consolidating for a period of weeks or months after huge runs, would often gap again in the premarket many weeks or months down the road.
AllDayFaders (ADF) had discovered a pattern.
These “penny stocks” as they are known to some, have a tendency to make huge intraday runs from time to time, sometimes doubling, tripling, or more in a single day, only to fade off and close lower the very same day.
They were running into an area of prior volume-weighted price resistance from previous high-volume days.
If he tracked backwards on the daily chart until he ran across a prior high volume run, he could use that day’s intraday vwap as a guide for the current day’s trading levels.
According to ADF, the probability is around 75-80% accuracy that the stock will run into serious resistance at these levels. And the reaction to the levels will dictate the action he needs to take — going long or short.
Along those lines, ADF has found that 70-80% of the “best faders” die in the premarket.1. This might be a limiting factor for who can trade these type of securities. But for experienced day traders with the right tools, it can provide a great opportunity to profit before the market opens.
Outside of the premarket hours, ADF admits that the second best time to short extended stocks is “by 10am.” But only if the volume is climactic.
Those are some pretty decent odds for trading. And anyone who trades low float stocks knows how difficult they can be to trade. The temptation is there for quick and massive profits. But the risk of heavy losses looms large.
Knowing that, the #vwapboulevard strategy can be a good tool to increase your odds of success and mitigate risk. Let’s dig a bit deeper into it.
It’s quite simple actually.
Note that ADF uses and recommends ThinkorSwim for his calculation, so he references TOS a lot. Nonetheless, it can be found on just about any charting platform.
Without further ado:
No need for a script.— AllDayFaders (@team3dstocks) April 2, 2021
1 Pullup the daily chart on TOS
2 Look for recent, overhead big volume days
3 Identify their vwaps
If the stock approaches it & fails =short on trendbreak.
if the stock breaks it & holds it post breakout = long.#BearTipOfTheDay https://t.co/Awyk1DkTRt
Essentially identify the intraday vwap level for the prior highest volume days that the stock ran. Draw your line there, then wait for the current premarket or intraday action to reach and react to that level.
A simple formula right? In principle, yes. But that is definitely the simplified version.
As a rule of thumb, ADF also recommends only trading extreme gaps of 50% or more.
Years of price action trading experience will likely help as well. After all, you will need to know how to interpret the security’s reaction to these levels and have the discipline to put on a successful trade.
Not to mention being able to handle extreme volatility.
Along these lines, in order to help qualify the trade better, ADF employs a volume forecasting indicator.
A volume forecast is essentially a way to predict the “end of day” volume earlier in the trading session, and at different time intervals.
Niv Goren has done a fantastic job of explaining this unique indicator and how to create your own version on his site inthemoneyadds.com. Like others, his inspiration came from AllDayFaders’ influential Twitter posts.
In his blog, Niv describes the step-by-step process of collecting data on prior high-volume, low-float runners, then choosing a predictive model with which to run the calculation. The results are then correlated “between different ratios and end of day results,” he says.
Understandably, running calculations like this for different time intervals, collecting the data, and analyzing it all may seem daunting. For that, Niv has created his own indicator that he sells through his site with tips on how to interpret it.
The goal with the indicator, however, is not necessarily to “know” the end-of-day volume. The goal is to understand how quickly the ratio is expanding between current volume and the end of day forecasted volume. Especially at the start of the session.
We then need to ask what this can tell us in relation to vwap boulevard and other factors. How quickly the forecast expands might tell us whether or not the stock may continue squeezing.
To understand the timing of his trades better, Niv has plotted a histogram to determine the time frame in which the majority of small cap stocks reach their intraday peak.
Interestingly enough, his findings are in line with AllDayFaders’ “by 10:00am” statistic.
Niv’s site includes a lot of varied and useful data, i.e. where you should cover your short, some special considerations, etc. Click the chart above, it’s worth a read if you have the time.
The last thing worth noting with the volume forecast indicator is how it might forecast float rotation.
Serious small cap traders pay close attention to float data.
Professional day trader Nate Michaud of InvestorsUnderground.com coined the term after suffering a few losses earlier in his career. Nate describes it as
“the term we use referring to names with tightly held float when it begins to trade two, three, ten times and beyond the listed float causing shorts to ‘add add add’ in disbelief only to send it higher.”Nate Michaud
So, what exactly does this mean and why is float rotation important?
Essentially, the available shares are being churned rapidly throughout the day. Contextually, if the stock is finding support at vwap boulevard and building sound bases on the way up, this could spell trouble for shorts who are, like Nate says, “add add adding” on the way up.
We’ll see an example of this in a moment.
Suffice it to say, that averaging up or down can be a very dangerous and fast way to lose money.
This goes back to ADF’s warning:
Let’s take some examples from recent months to see how the pattern actually plays out.
In order to visualize this and trade with the correct “boulevard lines,” we’ll take a few examples of longs and shorts at these levels and examine them.
First, let’s jump back in time to the morning of September 23, 2020. We run our premarket scan which includes market caps lower than 100m, or small cap stocks. We notice that SPI hits our %gainer list with a 200% gap in the premarket.
Here is a look at SPI’s premarket chart:
The question now is what happens at the open, right?
Sure, we could likely place a trade with the information from this 1-minute premarket chart. There are some key levels in the premarket and so forth.
But why are they significant? Is there more to the story that could help us? There is.
Let’s now zoom out to the daily chart, and try to find our highest volume days.
As we can see from prior months, there are a number of really high volume spikes associated with big advances. These are the clues we’re looking for.
As part of your premarket routine, when a stock that fits your criteria hits the scanners, you’ll want to locate these days on the chart.
Now comes the fun part.
You should be able to overlay a vwap indicator and find the intraday vwap levels for each of these days. Most charting platforms will have this. AllDayFaders prefers TOS charts and finds them more accurate.
If you need to get a little more granular, you can go down to the hourly or 4-hour chart to find the intraday vwap levels for the prior high volume days.
We’ll do this now using the 4-hour chart below.
In the image above, VWAP is the red line. What we’ve done is drawn horizontal lines at these vwap levels that occur during the highest volume days on the chart, typically near the closing vwap price.
As you can see, we have significant volume at $1.70s on the low end, $3.30s, and the $4 area.
!!!Be sure to superimpose the horizontal lines on the smaller time frames you’ll be trading on!!!
Now that our #vwapboulevard lines are drawn, let’s get back to that 1-minute chart and see if these lines come into play with SPI’s premarket price action.
Sure enough, these lines end up being significant. Before the open, we have a test and fail at the upper vwap boulevard at $4, as well as some significant support and resistance with the $3.30 line.
Now, as ADF has stated, “if volume doesn’t fall off a cliff by 10am,” we want to either get out or look for a long setup. If the top line of $4 is our upper vwap boulevard, then we need to see lower prices soon if we are taking this short.
By 9:30am, we are on the “frontside” of the trade. In other words, we are making higher highs and higher lows.
Fast-forwarding to 10am, we see the action getting hotter as volume continues to persist. We put in a double bottom at one of our #vwapboulevard key support areas of $3.35 then retest the red vwap intraday line.
At this point, volume isn’t really breaking down yet, which should give us pause for concern if we are short from the top. At the very least, we’ve identified our stop loss areas depending on our short entries earlier.
Likewise, if we have employed the help of the volume forecasting tool, it might be a good time to check in and see what our percentage is, or how quickly we have or have not rotated the float.
On the flip side, bulls may be looking at this for an opportunity here, risking against the key $3.30s line and intraday vwap for a long entry.
Continuing forward in time, let’s see what happens by 10:30am:
In the wise words of Scooby-doo, “ruh roh!”
It was supposed to fail wasn’t it? Volume is increasing. The stock is now up 342% percent. If you’re short, what do you do?
This is the purpose and benefit of the vwap boulevard strategy. Not all the key levels had broken down. Our guides were there giving us information to either cancel our short, or go long.
In light of this, you should step back, look at the big picture now, and ask yourself, “who is trapped?”
That’s the beauty of vwap boulevard, according to ADF. It presents us with another layer of the market in order to hypothesize on this question.
In other words, what is the meta trade? Or, the trade behind the trade. What’s going on in the big scheme of things with buyers and sellers that can give us confidence going long or short.
Using this thought process, whoever was averaged in short at the levels on the chart above are now in deep water.
At this point in the day, SPI has traded 82.1 million shares. It only has 16 million shares in the float. That means it has churned through the available shares over 5x since the day began.
That’s a lot.
Let’s revisit why this is significant.
As Nate Michaud points out, a float rotation is like a “refresh of shareholders.” As this happens, “the stock’s trading behavior changes.”
In a great blog post on this subject, he gives the example that at each successive level you find new short sellers who replace the ones who’ve blown out at the prior levels.
ADF describes it this way:
Imagine u're short 100K shares on a lowfloat stock that can rip a few cents on just 10K share orders.— AllDayFaders (@team3dstocks) March 9, 2021
Ur avg is $3.00 and the stock rips to $4.00.
There's no way in hell u're covering that high (the slippage will be massive, not to mention u're scared to cover at the top). https://t.co/dzFOIxIBFz
Therefore, if longs are in control from below with a better average and a better foothold on the available shares, short sellers are really at their mercy. They are all scrambling for liquidity to cover their shorts.
This adds fuel to the fire as they average up, only to cover higher while the price continues to rise on lower supply. In the meantime, new shorts come in to sell the stock at higher prices believing it is too overbought, yet they are eventually squeezed, too.
Why does ADF recommend getting out of the way if you’re short when this happens near vwap boulevard?
See for yourself:
At $40 those shorts near the $4 vwap boulevard are probably wishing they’d gone long instead. Or at least covered. Wouldn’t you say?
The stock symbol EYES from March 5, 2020 gave us another great example of how important vwap boulevard can be. For the sake of time, I’ve identified the vwap level for the three highest volume bars on the daily below.
These levels occur at $1.70, $2.56, and $3.46, give or take a few cents. Again, this is what you do after you’ve seen EYES hit your small cap scanner in the premarket on considerable volume and %gain.
If you’re going to trade this strategy and don’t have a built-in indicator, you’ll need to draw these lines. At the time of publication, there are a few free vwap boulevard indicators available now, from scriptstotrade.com and thevwap.com.
Now, let’s look at the premarket:
Notably, EYES hit resistance at the $2.50s level and gets rejected in the premarket. But like our SPI example above, it isn’t putting in lower lows yet.
ADF makes a note of this rejection on his Twitter feed on this day, calling out the exact levels we’ve drawn above:
Later that week, a follower of ADF notes the other level of $3.45 that we also identified above. It was a lower volume day, which ADF claims would likely have been less significant.
$EYES Correct. jan 26's vwap ($2.56) had 20M volume, and was the next closest bagholder level.— AllDayFaders (@team3dstocks) March 7, 2021
Dec 23 's vwap ( $ 3.41) only had about 5M shares traded that day.
Which day do u think would have the most bagholders?
That's how u decide which day to use for #vwapBoulevard https://t.co/Gl5iUpd1ev
For this reason, we should assume that the $2.56 level was the key for our long or short thesis, but could still expect some turbulence at the $3.45 level if it got there.
Obviously this is Long Example 2, so there is no spoiler that the stock went higher. Let’s check out the move it made.
Before we see the whole day, let’s pause here at 10:10am.
Like SPI, VWAP Boulevard couldn’t stop the bulls from crossing — no pun intended. And as we know that most of these should fail by this hour of the morning session, it was time to cover and walk away if you were short.
To that end, ADF tweeted at 10:10am with this exact warning: “Stop out immediately.”
Wise words from the master himself, as EYES ripped higher throughout the day, all the way to $10 before noon.
We call these outlier moves. They happen from time to time. Nate Michaud does a great job explaining the thesis and fundamentals behind these moves in a great YouTube video.
For all intents and purposes, at 500% in a single day, EYES was definitely an outlier move.
Before we move on to shorts, take another look at the last line we have drawn at the $3.46 level for EYES (the upper black line). As mentioned above, this area was a bit of a last resort for shorts from a prior day’s vwap.
It offered one more opportunity to trap shorts and then simply grinded higher.
And there you have the long side of the story.
The above examples are outlier examples of what CAN happen. Not all low float stocks will make huge moves like this.
Keep that in mind and trade at your own risk.
VWAP Boulevard wouldn’t be what it is without his namesake, AllDayFaders. After all, the larger percentage of these stocks fade hard after reaching their peak in the premarket, or by 10am.
With that in mind, let’s glean what we can from two real-life examples.
Fading all day was certainly the case with VCNX on February 19, 2021.
Since we have already discussed how to find and set lines for vwap boulevard, we’ll just show the daily chart with them already plotted to get started.
As can be seen in the next image, VCNX was gapping nicely in the premarket on heavy volume. By 9:30am EST, it was up over 100%.
However, it had not yet reached vwap boulevard:
This doesn’t mean that it is guaranteed to run into vwap boulevard. Obviously, there are no guarantees in the market.
Nonetheless, if this stock is on your radar from the premarket scan, you want to be aware of the key levels it could run to. If you’re watching multiple stocks or positions, price alerts can give you a heads up if it decides to rip higher without your eyes on it.
With levels set, if we get an exhaustive move into this prior resistance level, it could signal a short.
Let’s watch the quick replay:
VCNX vwap boulevard replay
With the help of bulls that morning, VCNX arrived right on time at our VWAP Boulevard level. 10am literally marked the top.
In the replay, at vwap boulevard you see a huge exchange of shares on the levell II. As noted in many of our other posts, this is a classic example of effort vs. result, and exhaustion.
Long chasers were literally handing there shares over to short sellers who were absorbing the upward momentum. After one last push above vwap boulevard, the trend changed.
We get a red “kill candle” as bulls walk away and bears go looking for “blood,” as ADF would say.
The rest is history.
As a side note, VCNX had a float of around 15 million. By 10am that morning, it had already surpassed 100 million shares traded.
From the image above, it is quite clear that the majority of the shares traded occurred during the initial bull run to vwap boulevard. As ADF notes, the ideal “all day fader” will trail off considerably after 10am.
At that point, the momentum is lost, giving bears the confidence to ride it down.
Do yourself a favor: save your spot here and scroll up to compare the volume after 10am on the VCNX chart with the volume post 10am on the EYES chart above.
Returning for a moment to our discussion of Niv Goren and his analysis, we can find more data regarding the low of the day. This should help us with predicting a time to cover our short position.
According to Goren, a majority of these small cap / low float securities that fail according to plan will put in their ultimate lows in the last 30 minutes of the trading day.
Niv’s article is worth a read as it outlines several key points that line up with ADF’s predictions, along with a few special circumstances that Goren backtested.
Generally speaking, this data makes sense of ADF’s strategy for holding these particular securities for the entire day as they are statistically more likely to make new lows by the end of the session.
For our last security, we’ll pick a premarket #vwapboulevard example. As ADF notes, stocks that reach this level and fail in the premarket are usually the most reliable all day faders.
XSPA did just that on March 8, 2021.
Per our premarket routine: once the security hits our premarket scanner, we pull up the daily chart and identify the prior highest volume days.
In this instance, using the January 28 intraday vwap level, we draw our line at $2.71
Once the lines are drawn, we head back to the premarket to plan our trade and see how it reacts to the levels.
With uncanny accuracy, the level proves worthy to short as bears reject the upward momentum and defend their boulevard. The stock never recovered and proceeded to sell off the entire day.
And that is the short side of it.
The above examples are typical examples of what CAN happen on the short side. Not all low float stocks will fade all day. There may be times when stocks squeeze end of day.
Keep that in mind and trade at your own risk.
How do you find good candidates for VWAP Boulevard?
This will depend a lot on your trading platform and tools. Most charting and trading platforms have built in scanners. So the look and feel of your scanners will vary greatly.
We’ll save an in depth look at scanning for another day, but essentially, what you are looking to do is narrow your results by a few things:
Your premarket %gain scanner is great way to narrow these results. Then once you have a few good candidates, narrow them down by float. After that work is done, it is up to you to set the VWAP Boulevard lines.
However, if you’re looking to practice this strategy in a simulator, we have done a lot of the work for you. Our scanner can scan for premarket gainers with data going back 3 years. You can also narrow by float size, premarket gap %, and volume.
Here’s a quick look:
Once you’ve saved your scan. Simply head back to the chart view and you’ll find your list narrowed to the top performing candidates for that day.
All that’s left to do is set your vwap boulevard lines with the drawing tool, and you’re set!
Be sure to re-watch the video at the start of this tutorial for more guidance on how to do that.
There is a lot to consider with this unique strategy. Hopefully this guide has united a lot of the data for you and how it all comes together. It is certainly a more advanced day trading strategy for those comfortable with the nature of small cap securities and the volatility associated with them.
That being said, there are few points worth considering when shorting this type of strategy:
@team3dstocks has a wealth of knowledge in his tweets. He is often asked questions, but recommends simply doing a search for his tweets using Twitter search tools. Rest assured you’ll likely find an answer this way.
For example, a simple search of #vwapboulevard or #beartipoftheday will turn up a myriad of tweets on the subject. On that token, he is usually good about tagging his tweets for the very purpose of finding specific information — even for specific ticker symbols.
Here is an example of results for a quick search using #vwapboulevard:
Regardless of all the information, it takes practice and time to become acquainted with the strategy and nuances of trading it with real money.
As always, we are big proponents of putting strategies to work in a realistic environment without the risk. Once you have a solid dataset of successful simulation trades, you can try your hand with real money.
Just know that emotions will affect your performance more often than not. It is for that reason that simulator training can be a great tool to increase your learning curve on what to expect before employing actual cash.
Here’s to good fills. And remember, look both ways when crossing the #vwapboulevard!