VWAP Band Mean Reversion with RSI and a Volume Filter

Summary

This script describes a mean-reversion approach built around a volume-weighted average price calculated over a rolling window. It estimates volume-weighted absolute deviation from that basis and uses bands at two and three times the deviation. A long signal occurs when price crosses below the lower two-deviation band while RSI is below its oversold threshold; a short signal requires a cross above the upper band and an overbought RSI reading. An optional volume filter suppresses entries during unusually high volume, defined relative to a moving average.

Open positions have a stop based on a percentage distance from the current close and a profit limit at the VWAP basis. The excerpt gives example parameter defaults, but ends partway through the plotting section and includes no market, test period, or performance results. The document is labeled for forex, yet the shown logic relies on volume data, whose interpretation and quality can differ across forex feeds. The code therefore presents rules to investigate, not evidence of reliable returns.

Key ideas

• The rolling VWAP basis and volume-weighted absolute deviation define the strategy's reference price and bands.
• Long and short entries require both a band crossing and an extreme RSI reading.
• An optional filter blocks signals when current volume exceeds a multiple of average volume.
• Stops use a percentage distance from the current close, while profit limits target the VWAP basis.
• The excerpt provides no backtest evidence, and volume inputs may vary in quality across forex feeds.

Tags

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