BTC Liquidation Fade Strategy Using VWAP Bands

Summary

This strategy uses one-minute BTC volume-weighted average price (VWAP) bands to frame a liquidation-driven fade trade on Bybit swaps. It calculates VWAP from typical price and volume over a rolling set of up to 1,440 candles, then places upper and lower bands using percentage offsets. When a BitMEX XBTUSD liquidation message exceeds the stated quantity threshold, a buy-side liquidation above the upper band prompts a short; a sell-side liquidation below the lower band prompts a long. The code also limits position size and calculates trade quantities from account balance and leverage settings.

Risk controls include an initial dollar profit target followed by a trailing exit, a percentage stop, and a pause after a stop-out. The published parameters suggest a 9% stop and a one-hour pause, but the stop condition in the code compares price against an entry-relative level using the current price, so its behavior may differ from a conventional fixed-percentage stop. The document provides implementation details, not performance evidence or a tested risk-adjusted result; it also depends on a separate liquidation feed and exchange-specific execution behavior.

Key ideas

• The strategy calculates VWAP from typical price and volume over a rolling one-minute candle history.
• It fades large BTC liquidation events when price is beyond a percentage VWAP band.
• Buy-side liquidations above the upper band trigger a short, while sell-side liquidations below the lower band trigger a long.
• The code combines position limits with trailing profit exits, stop-loss handling, and a post-stop pause.
• The document gives no performance results, and the stop logic and external liquidation feed warrant careful validation.

Tags

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