Adaptive VWAP Bands for Trend Following and Mean Reversion

Summary

This configurable strategy builds a volume-weighted average price from typical prices and cumulative volume, resetting the calculation by session, week, or month. It estimates volume-weighted dispersion around VWAP and plots three bands at selectable standard-deviation multiples. Traders can choose trend-following entries around VWAP or band breaks, or mean-reversion entries when price moves beyond a selected band and crosses or reclaims it.

Filters can require stronger volume, sufficient ATR and band width, a directional VWAP slope, or secondary RSI or EMA confirmation. Mean-reversion trades can also be screened by ADX and distance from VWAP. Stops may use ATR or bands; profit targets can follow VWAP or an opposite band. Position sizing uses a risk allowance and caps notional exposure, with optional break-even adjustment. The document provides implementation logic and configurable parameters, but no reported backtest results or evidence that the rules are profitable. Outcomes will depend on instrument, timeframe, costs, and parameter choices.

Key ideas

• VWAP and volume-weighted standard-deviation bands can be anchored to different calendar periods.
• Trend entries use VWAP or upper and lower band breaks, while reversion entries use moves around a selected band.
• Volume, volatility, bandwidth, slope, ADX, RSI, and EMA rules can filter signals.
• Stops, targets, risk-based sizing, exposure caps, and optional break-even management define trade handling.
• The script supplies no performance results, so its effectiveness is unestablished.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.