One Missed Train: One Line That Brought Clarity
- A Missed Train and an Unexpected Lesson
- The Line Institutions Watch Closely
- The Bands That Highlight Extremes
- A Platform Announcement and a Clearer View
A Missed Train and an Unexpected Lesson
The early morning platform at Howrah Junction was packed. Trains whistled, vendors shouted, and the smell of tea hung in the air. Arup, a small manufacturing unit owner from Asansol, stood near the edge of the platform staring at his phone. He had just missed his train to Kolkata and looked annoyed, not because of the delay, but because his trades from yesterday were still on his mind.
Nearby, Sanjay, a railway signals engineer, was sipping tea while waiting for his shift to start. Next to him stood Maya, a market trainer who conducted weekend workshops for retail traders. They had met randomly through a mutual friend and were passing time until the next announcement.
Arup muttered to himself, “Every time I buy, price feels expensive. Every time I sell, it suddenly feels cheap. I don’t understand what a fair price even means.”
Maya heard that and smiled. “That sentence itself tells me what you’re missing.”
Arup looked up. “And that is?”
“The market often trades around a fair value,” she said calmly. “Most people just don’t know how to observe it.”
Sanjay raised an eyebrow. “You’re talking about charts again?”
Maya nodded. “Yes. But not the usual ones. I’m talking about VWAP, and more importantly, VWAP bands.”
The Line Institutions Watch Closely
They moved closer to a quieter corner of the platform. Maya explained.
“VWAP stands for Volume Weighted Average Price. Unlike a simple moving average, VWAP doesn’t treat all prices equally. It gives more importance to prices where more trading happened.”
Arup frowned. “Why does volume matter so much?”
“Because volume shows participation, If a lot of buying and selling happened at a certain price, that price carries more weight. Many large market participants look at VWAP to judge whether prices are relatively higher or lower compared to the day’s average.”
She continued, “VWAP is calculated by multiplying price by volume for each candle, adding it up, and dividing by the total volume. This gives an average price level where most activity took place.”
Sanjay nodded. “So VWAP shows a kind of average value for the day.”
“Exactly, when price is above VWAP, it is trading above the day’s average. When it’s below VWAP, it’s trading below that average.”
The Bands That Highlight Extremes
Arup asked, “But price doesn’t stay on one line.”
Maya replied, “That’s where VWAP bands come in. Like other band-based tools, VWAP bands show how far price has moved away from the average.”
She explained carefully. “VWAP bands are usually built using standard deviation. There’s a band above VWAP and one below it, sometimes more than one level. When price moves far above the upper band, it suggests price may be stretched. When it moves far below the lower band, it may be stretched on the downside.”
Sanjay smiled. “So extremes become easier to spot.”
“Yes, some traders wait for price to move too far away from VWAP and then watch how it behaves around those levels. This is called mean reversion.”
She added, “VWAP can also act like a moving reference point. In some trending markets, price reacts around it. In choppy markets, price may cross it often.”
Arup nodded slowly. “So instead of guessing support and resistance, VWAP gives a reference based on real activity.”
“Correct, it’s studied across stocks, futures, forex, and other markets where volume exists.”
A Platform Announcement and a Clearer View
The loudspeaker announced the arrival of Arup’s delayed train. The crowd began to move.
Arup looked relieved, not just because of the train, but because something finally clicked. “This explains many of my bad trades. I kept buying when price was already far above the average without realizing it.”
Maya smiled. “VWAP doesn’t predict anything. It helps keep perspective. It shows where average value is and how far price has moved from it.”
Sanjay added, “Sounds like railway signals. Stay within limits and things run smoothly.”
Maya laughed. “Exactly.”
As Arup picked up his bag, Maya said, “Platforms like the Navia All In One App makes the learning easier.”
The train pulled in. As Arup stepped inside, he felt calmer. Markets would still move fast. But now, he had a clearer way to judge where price stood. And sometimes, that’s all a trader really needs.
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DISCLAIMER: This story is a fictional illustration created for educational purposes. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Brokerage will not exceed the SEBI prescribed limit. Full disclaimer: https://bit.ly/naviadisclaimer
