VWAP Mean Reversion Entries with RSI and a Volume Spike Filter

Summary

This strategy seeks reversals toward a rolling, volume-weighted price mean. It computes the basis over a configurable lookback and measures volume-weighted absolute deviation to form outer bands. A long setup occurs when price crosses below the lower two-deviation band while RSI is oversold; a short setup uses a cross above the upper band with overbought RSI. A filter can suppress entries when current volume exceeds a multiple of its recent average, which the description presents as a way to avoid possible breakout conditions.

Open positions target the rolling VWAP basis and use a percentage stop setting. The accompanying notes frame the method for range-bound forex markets and caution against strong trends, breakouts, and high-impact news. The document contains code and suggested defaults, but it offers no backtest, forward-test, or instrument-specific evidence for its performance claims. Its volume and deviation measures depend on available volume data, so suitability may vary across forex feeds and other markets.

Key ideas

• The rolling volume-weighted mean acts as the strategy's reversion target.
• Volume-weighted absolute deviations define bands around that mean.
• Entries combine a crossing of an outer band with an RSI extreme.
• An optional filter blocks signals when volume is unusually high relative to its recent average.
• The strategy is presented for range-bound conditions, but the document supplies no performance validation.

Tags

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