Master Professional Trading
VWAP, RSI, MACD, Bollinger Bands, ATR, and Initial Balance
Simple Moving Average (SMA): Arithmetic mean of prices over N periods. Equal weight to all data.
Exponential Moving Average (EMA): Weighted average giving more importance to recent prices. More responsive.
| Period | Use Case |
|---|---|
| 9 EMA | Ultra-responsive, immediate trend |
| 20 EMA/SMA | Short-term trend, day trading |
| 50 SMA | Medium-term trend |
| 200 SMA | Long-term trend, major S/R |
Popular combinations: 50/200 day, 9/21 EMA, 20/50 SMA
VWAP calculates average price weighted by volume, providing a more accurate reflection of true value. Resets each session.
VWAP = Cumulative(Typical Price × Volume) / Cumulative(Volume)
Standard deviation bands extend above/below VWAP, representing areas of overextension.
Institutional traders use VWAP as benchmark—buying below or selling above is considered good execution.
Momentum oscillator measuring velocity of price movements. Ranges 0-100.
Bullish Divergence: Price makes lower low, RSI makes higher low. Suggests upward reversal.
Bearish Divergence: Price makes higher high, RSI makes lower high. Suggests downward reversal.
Most robust after overbought/oversold readings.
Bullish Crossover: MACD crosses above Signal Line—upward momentum
Bearish Crossover: MACD crosses below Signal Line—downward momentum
Histogram: When it peaks and declines, a crossover is approaching. Early warning system.
~95% of price action occurs within the bands under normal conditions.
When bands contract to their narrowest point, it signals low volatility—often followed by explosive moves.
ATR measures volatility by capturing the full range of price movement, including gaps.
True Range = Greatest of: High-Low, High-Previous Close, Previous Close-Low
ATR = Moving average of True Range (typically 14 periods)
ATR-based stops adapt to current volatility:
Example: ATR = 2.00, entry at 100, 2× ATR stop = 96
Position Size = Risk Amount / (ATR × Multiplier)
This maintains consistent risk regardless of volatility—smaller positions in high volatility, larger in low volatility.
The price range established during the first hour of RTH (8:30-9:30 AM CT for ES/NQ).
Extensions project beyond IB as profit targets: