The Only Truth Left in Trading is VWAP. Here’s How to Use It in the Sickest Market Ever.

“Okay, we'll start with, ‘VWAP saved my life,’” said Kenny, and he started rolling.

During a recent work trip to New York, I set aside some time to interview day trading legend Kenny Glick. 

This one went a little faster than some of my other Q&As, because my good friend Kenny is professionally trained to speak in monologues.

There were a couple of natural pauses where I interjected, mostly to try and trick him into giving me a textbook definition of volume-weighted average price (VWAP) — his area of expertise. 

I should have known better, and I was rebuffed.

It’s not until 19:30 in my transcript, when I asked if VWAP has ever betrayed him, that we get to the real meaning of volume-weighted average price: 

Kenny Glick: No, no, it's the only truth left — not just in trading, in life. Really, it doesn't lie, because it is what it is. It's telling you institutional strength, especially late in the day.

One of the OG trades, my OG VWAP trade — 

So we're still recording? This is important. 

Elizabeth Volk: Recording everything.

Kenny Glick: When I first got into VWAP, I was like, “Why does this matter?” And when it was explained to me, this was the first explanation, and it’s still the most important explanation: It's an institutional guide to whether the trader themselves did a good job for the day. 

So let's say you work for me, and I give you an order for 300,000 shares of XYZ. At the end of the day, 4:00 PM, that prints the VWAP. Let's say XYZ’s final VWAP is 63.85, and I told you to buy 300,000 shares. For me, your average price needs to beat the VWAP, and then you get a bonus. Or if you keep failing to beat the VWAP, you're fired, right? 

Think of it this way. If you're the trader doing the buying, maybe you have 200,000 shares so far, and you still got to buy 100,000 more. Now the stock is breaking above VWAP at the end of the day, and you have to actually start chasing your own idea. So that late-day VWAP break, all the institutional traders are chasing the stock because they all have to beat the VWAP, too. 

When you see a stock that's under VWAP predominantly the whole day, and then you get a late-day break, it’s because now they're all buying in a frenzy to keep that average price of what they're trying to accumulate below VWAP. And that really made a lot of sense to me. 

Now, 12 or so years later, using it exclusively, to me it's just algorithmic. That's the way it is. And when you see the stocks ebb and flow to these price levels, it's not a coincidence that sometimes they stop on the exact VWAP level, and that's where you'll see some sellers. 

But what's important is when you hit the VWAP and you break over it and hold it. You know, that’s when you got a trend reversal.

We’ll be talking a lot more about those trend reversals. Or, more accurately, he will.

Also, how Kenny defied his old manager’s low expectations; why VWAP plugs you straight into the matrix; the truth about managing risk in day trades; and even why Xanadu Quantum is his favorite stock he doesn’t own.

But before I let him take over, a quick note to clarify: VWAP has never betrayed Kenny Glick, even though Kenny Glick has occasionally betrayed VWAP with his own lack of discipline.

First, click to get your very own VWAP chart setup so you can play along at home. Now here’s all the rest, in his own words.

‘VWAP Saved My Life’

COVID really just brought day trading back because everybody was trapped in their house.

That's why we went from “Oh my God, the world's coming to an end,” when Tom Hanks got COVID to the greatest market rally since ever, until this last one. 

It's just insane. But you know, VWAP crystallizes it for you. That's why I say VWAP saved my life.

I'm a bearish guy, and I always used to think at moments like this — with Iran, and the price of oil going up, and the uncertainty about the political world — I would always think that would be bearish. 

But nobody cares. 

No, the market doesn't give a s*** about anything. It's programmed, and the program is VWAP. That's why I want to — man, if you're trying to trade any timeframe now without it, at least have it on your screen. 

You swear by moving averages, you like stochastics and Bollinger bands, which is all voodoo to me — now, just add the VWAP to your chart, and you'll see how it works together with everything.

Dialing in the Gap Fade

Well, as a short seller, the first thing I noticed was that stocks do not like to stay down when they get back over VWAP.

And you know, if I had discovered the power of it in 2012, 2013, 2014, where I just became addicted to trying to outsmart the market, I would have saved myself a lot of money and a lot of grief, and I would have saved myself a lot of time. 

So from that learning experience, I was like, “You know what? Let me see which trades work the best.” So I went back to a trade that was working for me, which is the gap fade. 

And obviously, looking at it from the short side, anytime a stock was gapped down, and if it broke below the opening range, but then it got back above VWAP — nine out of 10 times, it would change the trend of the stock. So I just started doing that trade. 

I went from being a victim as a shorter to knowing when to cover and then go long, and it just changed the game for me. And then I just started concentrating on that one trade. Fast forward 11 years later, and I’m still doing it now. 

It’s just a gap fade. But the trade that I was doing back in, let's say 1997–1998, when I was fading the gap, I was using the high of the day as a stop, or buying it near the lows and hoping it wouldn't break down. 

Now, with VWAP, I'm getting in at a better price ahead of the curve, with less risk and more reward. 

Becoming the Matrix

Going back to 30 years ago, everybody knew VWAP. You never traded it. It was just a number. 

But as this evolution has happened in the world of trading, where the algorithms are taking over, now people are using it in their formulas to program. So you’ve got more and more quants that drive this high-frequency trading using the VWAP as their go-to price to start putting on trades.

It's a self-fulfilling prophecy. The more and more people that are using it, the more it's working. And that has to be the reason that, fast forward all of these years, I've never seen anything work so accurately. 

One of the best parts is that every time you put a trade on around VWAP, you're getting in at a price where even if the trade doesn't work, it's a small loss, and when it works, it's medium, large, and extra-large wins. So it instills the discipline and the money management all in one simple line, and if you obey it and use it seriously — no matter what, even when you're having a couple of bad trades — there's small losses. 

And in trading, that's the whole nature of the game. You're allowed to take losses. You just have to avoid the catastrophic loss. 

So with volume weighted average price, it's letting you know where the institutional order flows are going in. Instead of fighting the market, you are the market; you're piggybacking the institutional order flow. You're joining in when it's the best time to be involved in a trade. 

And again, back to the whole programming. It's definitely the way that this market is being programmed now, and you're just joining in on the algorithm. So, as a human being doing this, you're an AI now. 

All of the headlines are about AI and bots doing the work for you — what do you think they're trading? They're trading VWAP. So with this trade, now you're basically an AI bot joining in on the fun. 

Kenny Says You’re a Great Person

Over the last decade or so, since I've been doing this exclusively, there used to be maybe two or three opportunities a day to find these gap reversions around VWAP. Now you're getting what seems like 30, 40, 50 trades a day, where you have an opportunity to make money. 

So as a day trader, just trying to get paid every day — if you're not using VWAP as a day trader, you’re a loser. No, not meaning you're — you could be a great person. You're a loser trader because you're not using the most thorough, handy, institutional tool for free. 

It's not like this is proprietary anymore. It used to be hard to find VWAP. It's everywhere now, especially with platforms like Barchart, they're even adding anchored VWAP. 

I don't want to get into that right now, but multiple time frame VWAP, that's just basically showing you the ebb and flow of a market. 

Today's VWAP meets prior day VWAP, and with just those two little lines, you have the whole world of what the stock is going to do, probably — on the day, throughout the rest of the day, and even the next day. 

So you're getting so much information on just two lines of data, and that's why I swear by it.

Are You Sure You Don't Want to Get Into Anchored VWAP Right Now?

Let's get into it. Here's the craziest thing in the world I've discovered. 

Once I started looking at anchored VWAP again, I noticed that if a stock trended back above VWAP and the prior day VWAP, almost 100% of the time — which is absurd to even say out loud, because nothing works every time — it'll provide you a winning trade. And this is based on careful experimentation over the last three or four years, and it’s only when you have a very specific setup. 

So if you get a gap down stock on earnings, where you already have a gap reversion, you want to play that gap reversion. That’s if you get over today's VWAP, which is the one-minute, and then an anchored VWAP — what I call the multi-day. It's more than one day's worth of VWAP. 

It's been like four years now, and it's like 1,400 trades in a row, which is absurd. Because if I say these numbers, people are like, “What the f*** are you talking about? Nothing works every time.” 

But again, it's very specific, because you need a stock that's reported earnings; it needs to be gapped; and the gap needs to be either sold into or bought. And if you get over today's VWAP and prior day VWAP, 100% of the time, it'll provide you a winning trade. 

That's a very specific statement in itself because it provides you a winning trade. 

If you buy a 14-dollar stock — let's just assume VWAP is 14.20; multi-day VWAP, that's 14.50. Say you get through 14.20, you usually go to 14.50. You go over 14.50, 100% of the time your stock's probably gonna go to at least, let's say, 14.75 or 15. That doesn't mean you can just sit there and not actively trade it. 

It's an active trading setup, because at the end of the day, stocks could roll over. At the end of the day, you could wind up being down 8 bucks again. If you let a winning trade become a loss, you're the loser, not the trade. And again, it's just — for someone who's getting into day trading, you have to use VWAP. 

Anchored VWAP for Swing Traders

Now what I've discovered is that you can extend it, the anchored VWAP. You can anchor it to as many days as you want. So if you're a swing trader, now you're getting a pretty damn good picture of institutional order flow over a certain amount of days, and that's what swing trading is all about. 

For instance, in the market we're in right now, this has been the sickest five weeks in the history of the market. Like, stop right there. I've been doing this for 30 years and never seen anything like it. And the reason is that anybody could bang their head on the keyboard right now, hit the buy button on that symbol, and as long as your stock doesn't break anchored VWAP, you're good. 

And that's what's sick about this move. Even when we get into pullbacks, you're not breaking the prior day VWAP. So it's telling you to stay in — and that's the hard part about trading. You buy a stock at 180 and it goes to 210, you chomp at the bit, you want to take your profits, but anchored VWAP is telling you, just let it ride. 

You'll sell a little bit along the way to take some profits, but as long as the anchored VWAP is telling you the trend’s still intact for your swing trade, boom, you're still in. 

For me, that's it. It's just price action meets institutional order flow, whether you’re looking at it daily, weekly, monthly, or yearly. I even use it over decades now, because it's grabbing whatever data set you peg it to. So you can anchor it to — OK, I haven't anchored to three years ago. But what I love is that it does work quarterly.

Earnings, what I like to do is I look at the one-minute, look at the prior day, and now I also look at the three-month, because every three months is when companies report. So you're getting the institutional VWAP of the last quarter of this stock's life — what the institutions were thinking three months ago, where we are today — anchored VWAP puts it all on the chart, and you pretty much have a roadmap to success. 

On Day Trading and Risk

Well, you can go back to when I was first interviewed [by “48 Hours”] when I was 27, which is a long time ago now. 

The reason I was on TV in the first place was that some trader lost all his money and started shooting up the place, right? So they started coming around with all the TV cameras, going down the list, looking for the next guy to go postal. And my — the guy that ran the firm, he's like, “Yeah, Kenny's your guy.”

They made us all out to be degenerate gamblers, which we are, but we're doing it like anyone else. They were framing us as the gamblers of this industry. Meanwhile, anytime you buy a stock, it's an unknown; it's a gamble. Every single time. 

People thought it was more extreme, what we were doing. And I was defending the whole thing, because it really came down to one thing. I have a better chance to predict or know where a stock is going to be a half an hour from now than you do three weeks from now or three months from now. 

Granted, long-term investing, you don't need to predict. The market only goes up over any like five- to seven-year period of about the last 100 years. You don't need to predict, right? 

But when you start talking about short-term swings, I got a better shot at telling you where the stock’s gonna be an hour from now, or staying with that trend for the day, than I do knowing what's gonna happen tomorrow, right? So that's been the whole premise of day trading. 

As far as risk, again, if this is what you do, it’s not just a hobby where you hope you buy something at 9:30 for half an hour and it goes up, and you're like, “Oh, look at me.” 

If this is what you do, you're at the desk from 8 to 5, like we are, managing the trade, and you're in control. If the stock starts going against you, you’re out. 

Finding Opportunity in Disaster

You know, somebody's disaster was my opportunity today. So the company called Xanadu Quantum, who the f*** knows what this company does? Doesn't matter, right? The word “quantum” is in it. Stock’s been ripping; it's all you need to know. 

So today, last night — whenever they said something negative — the stock was down like 80%. You thinking about selling it? No, you just wait for it to break above VWAP on the reversal. Then you're in, and you get a stock that goes from 12 to 16, and those four points, that's a solid trade right there. 

Then I sold it. I don't care about quantum anymore. I don't care about what Xanadu has to do, and why the stock went down. I took advantage of a disaster. Somebody who owns it might not be feeling too lovely today, but it's my favorite stock.

And that's the whole premise of VWAP trading. You're taking advantage of the market mechanics and putting yourself in a position where you have a better chance of success than anybody else. So that's why day trading right now is probably the least risky way to trade, other than buying the S&P and holding it for 10 years.

Any Final Thoughts? 

I can't stress enough how it's basically all I look at now, and nothing else on the screen. Just candlesticks and VWAP and anchored VWAP.

Alright, we're good now. Let's go party.

– By Kenny Glick as told to Elizabeth Volk. This interview has been edited for length and clarity. You can find Kenny on our official Barchart YouTube channel and at Hit the Bid.