For the first time i reveal one of the techniques that i use for my intraday operativity on this market. This method consists of using a short term average, the VWAP that you already know but calculated using no more then one or two days on a 15-minute chart; togheter with the VWAP i use an oscillator, the Relative Strength Index or RSI.
Whenever prices are testing the VWAP and an oscillator such as RSI confirms the oversold condition you can place a trade with a stop loss below the first negative deviation of the VWAP, this will leave enough room for your trade to avoid stupid stoploss being taken. You can lock in profits as soon as prices break through the first or second upward deviation.
In the attached example you can see very well how this technique works, especially when there is a strong volatility like these days. The RSI period is 8 instead of the canonical 14 used by most, i prefer a faster setting to have less lag, the thresolds used are 30 and 70, common values for this oscillator. When the RSI is below 30 is oversold and above 70 overbought. To give you an idea if prices at bitstamp retest today VWAP at around 595$-600$ and the RSI is oversold below 30 and then returns above it, i open a long position with a stoploss under 450$ with a take profit at 725$ and/or 870$ (first and second deviation of our VWAP average). If the price is too far away from the VWAP when the RSI cross above the thresold at 30, confirming a long trade, i don’t buy and i simply look forward to the next trading opportunity.
So combining VWAP and RSI you are using both time and price dimensions with the effort to maximize your profits, cut your losses and drawdown as much as possible.