Former Lehman Brothers Broker and VWAP Expert Shares His Knowledge
With over 30 years experience working as a broker and for other major investment firms, Brian has gained valuable insights into what moves markets and how to trade them with volume weighted average price.
Brian Shannon, founder of alphatrends.net is a full-time trader, educator and author of the highly regarded book Technical Analysis Using Multiple Timeframes. His expertise has been achieved over a 30-year period as he has navigated the difficult path that relatively few traders follow to success. Early on, as a broker with Lehman Brothers and other major investment firms, Brian gained valuable insight into market dynamics and the human factors that drive them. Brian is best known for introducing traders to VWAP and the Anchored VWAP as well as the 5 DMA on intraday charts, and why not to use 60 minute charts. He is a sought after speaker and contributing author to sites such as Investopedia. Brian is an original investor in Stocktwits. In the book The Stocktwits Edge, Stocktwits founder said of Brian "It is not an accident taht about 1/3 of the traders featured in this book point to Brian as the mentor who has had the biggest impact on their market careers". What follows is a recap of the Q&A. For the full transcript please GO HERE.
I have to ask why should technical traders avoid the 60 minute timeframe? This really caught my eye! — michaelbozzello
With 390 minutes in atrading day, chart using 60 min timeframe would have 7 candles. 6 candles would be 60 min & 1 would be 30 min. It is comparing apples to oranges, see this article I wrote for more details.
What is the best advice you would give a new and inexperienced trader? — DropDeadFred
To go slow! Learn as much as you can from more experienced traders but use that info to develop your own style. Style includes, timeframe, risk tolerance, what you trade
How to find the stocks to trade and what type of scan do you use? — scottz
My process is a manual one, I look at hundreds of charts each day to get a feel for what the market is telling me. Scans can help save time to narrow possibilities down, but I think that it is better to listen to the market than it is to tell the market what I want.
How do I get a minus dividend, Like -$10 in my account? — cypressnut
Im not sure, were you short a dividend paying stock? If so, the short seller pays the dividend. Good Q for your broker.
Soon $BTC.X goes “institutional” by entering CBOE. Do you think it could affect volatility stabilizing its prices? — artificialmustaches
I don’t think anyone can say for sure. Many unknowns exist with cryptos. I hope that it doeskin stabilize prices, lets keep it wild!
Does technical analysis (resistance/support, trend, fib, vwap, etc) apply to cryptos as well as it does to stocks? — TMD4817
Technical analysis is about trying to understand money flows and the motivations of the participants. TA has value in any market. VWAP is tough with crypto though because there is no consolidated quote source with all the volume.
What process do you use to generate trade ideas? What are your timeframes? — truber
It is largely a manual process. I am a swing trader. I look for timeframes to be aligned for the low risk entries into established trends. See this bookmark as a cheat sheet
What advice do you wish you had known early on as an investor and trader? — ryanguidry
Keep your analysis simple, tune out noise, and manage risk first and foremost!
What are your thought on $JAGX— satssingh93
Looks like a long term downtrend, I would have no interest personally.
Whats are your thoughts on $SPI. — danielrichie
Like the last stock, long term downtrend, I would personally stay away.
Are your models geared more towards stocks or futures and, if you apply them in futures, where does VWAP work best? — patrickrooney
I am an equities trader, that is focus of my work. As long as you have price & data, VWAP should work on the futures you trade.
What are your thoughts on the market crash that is to come? What sectors would see the best deals (value investing).— McCarthyWill
I’m a swing trend trader. I will be stopped out of positions long before any crash scenario. Focus on risk management in the positions you have and try not to worry about crash scenarios.
As a novice to trading, are there any specific recommendations of programs or alert systems that you use? — devo2093
TC2K is best value in charting , plus it has the Anchored VWAP by Alphatrends. See this post for a discount.
How can I find out more about you/books? — jlawrence1
My book is available on Amazon, here is the link.
Why do we sleep? — Bitcoin100Kby2020
Being well rested and alert for trade opportunities is one of the most underestimated aspects of trading performance.
What timeframe do you use to enter and exit? — SueO
See bookmark posted above, its multiple timeframes.
1. Identify trade on daily
2. Establish risk reward on 65/30 min.
3. Enter on shorter term 15/10/5 min.
Why is VWAP your favorite indicator and is it underappreciated? — scheplick
Because it is the perfect combination of price, time and volume. It shows true sentiment from any point. More people are recognizing its value as I have been quite vocal about it. I expect it will become more popular as people realize its value.
Do you think we are experiencing another era of irrational exuberance similar to the 2000 “dot com” bubble. — ark71
We’re in a great environment for long positions. With proper risk management it doesn’t have to end badly. Manage risk & avoid comparisons. Trade in the here and now with an appreciation of previous periods.
Just my thoughts and view. The market is in an 8 year bull market, a bear market is overdue. Maybe no crash and just bearish reverse. — McCarthyWill
If you have a consistent approach with risk management as a cornerstone, you don’t have to worry about bear markets.
In your mind, what are some of the qualities that make up a successful trader/investor? — saadey
Understand market structure thoroughly, find your style/timeframe, manage risk, don’t expect perfection, & keep learning.
Is it possible for a self-taught non-finance major to get into the field of daytrading for a legitimate firm? — TheWhiteRabbit
“Possible” sure, likely no. But, I wish you the best in that pursuit!
What’s your favorite sell signal? — bxvets
Price action. When the stock makes a lower low on the timeframe I am trading.
What’s a method for everyday traders to analyze sentiment on social media for stock movement? — Stock_Bites
Im not sure. I focus on individual opportunities and find AVWAP to be the best gauge of sentiment from any significant event
I have 10K shares of TOPS with average $1.44. What would you advise? Hold or sell with current loss? — Vin84
Tough one,you compounded mistakes here, buying a stock in a downtrend & not having a stop. I cant tell you what to do except to learn.
What University is most predominant in wall-street? How important is the prestige? — Vincent97
I’m not sure. Prestige isn't important to a trader. Making money is!
How many stocks do you hold or recommend? How do you protect positions? E.g., scale-ins or -outs? Relative sizing? — bearcharts
In fertile environment like now, I typically hold more positions. I am pretty concentrated still, up to 6 or so. Every trade has initial protective stop. I typically take partial off quickly when the trade works in my favor and raise stops when the stock allows. Sizing is based on dollars at risk, but I will adjust based on the personality of the stock or overall market conditions.
What do you think about the Bitcoin hype? Is this a viable currency? — OnlyW
To me, bitcoin is trading product only, no one is qualified to answer if it is a viable currency. Time will tell, meanwhile there are great opportunities to trade it with your most aggressive risk capital.
What is your preferred method to analyze volume? — derutte
Only Price Pays! But, I look for a minimum average daily volume of at least 500K and then consult VWAP to determine who is in control.
I often go a whole day or more without finding a trade (20 min cme fx) please comment thank you. — jtei
That is good, you need to listen to the market. Cash is a position which allows you to see things more clearly.
Is there a best trade setup that you believe it works above most of the time and how do you find it? — SuReshhh
Similar to many of the answers above, my “scans” are manual, but I prefer to see a stock (assuming long because we are in a bull market) that pulls back & consolidates. I then stalk that stock for CONFIRMATION that buyers have regained control on a shorter timeframe.
If a security is hard to barrow or unavailable, is it wise to buy in the money puts, then sell covered OTM at PT? — dtect34me
If I think a stock is ready for decline and there are options available, I will simply buy the puts.
I’m new here so any thoughts on Bitcoin Stock . I’ve never invested in anything before. — brucewright
Bitcoin itself is not a stock, if you are new I would suggest you stay away, start with less volatile products.
What are the pitfalls of VWAP and do you use other tools as confluence, if so which? — michaelbozzello
VWAP pitfalls are like any other technical tool, relying too heavily on it as a system rather than as a piece of useful information in a complicated puzzle. I also use simple moving averages, some fibonacci, pivots, and price is always first!
When insiders sell massive amounts of their shares what does that say to you? — Gunslinger686
Nothing really. If it is important it will show up on the chart and that is where I take my cues from, price action!
Are algorithm trading making the market more stable (less volatility)? Or extreme volatility is just around the corner? — Jeanlucpicard
Not sure if it is more or less stable, my job as a trader is to understand price action & manage risk.
What is your biggest mistake and how did you learn from it? — Massachusetts
Buying stocks in downtrends has been the source of my costliest mistakes. Stick to the trend for your timeframe.
What cannabis stock would you invest in now? — YataGara
The weed stocks are mostly smaller and volatile names. I’m not aware of any that are suitable for my style at this time.
Which areas of the market would you focus on over the near to mid-term? — zeromein
Focus is always on the good chart patterns where I can clearly identify what look like the low risk high probability opportunities.
What is your stock choice for a breakout in the future; short or long term. — cboneofenglewood
$TWTR could be setting up again. I have recent positions with stops in $GLW, $AMTD, $BGC, $POT, $ITT, and $CRCM.
Can commodities like oil/natural gas be traded purely off TA? Should supply/demand/economics be considered? — Lonesome
I personally do not trade commodity related stocks because of dual supply/demand issues for the underlying commodity & the stock.
What is the most valuable experience you got from working at investment firms like Lehmann? — KevInvest
How to sell things over the phone to people that they don’t want.
What are the best things to look for when buying stocks short term/weekly trading? — tesla8
An alignment of trend form the bigger timeframes, don’t fight bigger trends even for shorter term trades.
We hope you enjoyed this Q&A! Press the 👏 below if you really liked it and feel free to highlight or comment on any part. We also have a newsletter for anyone interested in getting daily updates about the stock market.
