Pro Trader Kenny Glick Talks VWAP Strategy That Works 'Almost 80% Of The Time'

Kenny Glick, former comedian turned day trader from HitTheBid.com, recently joined Christopher Uhl of 10 Minute Stock Trader for a discussion about today’s markets and his favorite day trading strategies.

Glick, who has traded stocks his whole life, said the market is experiencing a short squeeze across all sectors and segments, and the current climate of the market has made fundamental metrics virtually meaningless.

“The joke of what’s going on right now is we’re legitimately looking for the most worthless, terrible stocks that we can think of, and those have been the monstrous winners,” Glick said.

Forget Fundamentals: Glick noted that the days of buying high-quality stocks like Pfizer Inc. PFE and Bank of America Corp BAC following earnings beats are temporarily on hold.

“These last couple of weeks into today have obviously proven my theory that fundamentals have no place in trading and I don’t even think they have any place in investing anymore. It’s incredible what we’re witnessing, It really, really is,” he said.

For now, Glick is focusing largely on trading gap reversions following quarterly earnings reports. He's also relying heavily on a technical metric called Volume Weighted Average Price (VWAP), which is a means of calculating the average price of a stock over a given period by incorporating its volume.

“If something has gapped up on an earnings report, no matter good or bad, if the gap is up, I’m looking to sell. What I have noticed is one of the best trades is that if the stock is gapped up and breaks under the VWAP, almost 80% of the time you’re going to get a decent follow-through move to the prior-day VWAP,” Glick said.

Volume Is Key: Glick said this simple trade worked for earnings gaps to both the upside and the downside and was virtually the only trading strategy he utilized for about three years. He said the driving force behind the trade is volume, so popular stocks that have highly visible earnings reports worked the best.

“If it’s popular and it’s got a lot of volume, that’s when I’ve found that VWAP works best, so I generally do my best trading around the earnings reports,” he said.

“I’m also a reversionary trader because I like the fade. The fade was the first trade that I ever learned, so a gapped-up stock will generally be met with some sellers at the open because they’re selling the news.”

VWAP Trading Rules: Glick said VWAP traders should remember to never stay short stocks that are breaking above the VWAP and expect buying to accelerate as a stock price approaches the VWAP from the downside because accumulators need to keep their average price below the VWAP.

Glick said traders should watch for stocks that break out above the VWAP on the one-minute chart during the last hour of the trading day.

“That premise is one of the first trades I started taking, looking for stocks that were under the VWAP predominantly for the whole day, and if there was a late-day VWAP break, I think of a trader that’s frantically buying more of it to keep his average price under the VWAP.”