VWAP Reversion Entries from ATR-Band Rejections

Summary

This strategy looks for price to return toward VWAP after a move beyond a volatility-adjusted band. It calculates VWAP and a 14-period ATR, then sets entry bands 2.5 ATR from VWAP and stop levels 4 ATR away. A long setup occurs when the current or prior low pierced the lower band and price closes back above it; the short condition mirrors this at the upper band. The profit target for either direction is VWAP, and the trade is allowed only when the potential reward is at least 1.5 times the calculated risk.

Two additional filters restrict entries to selected New York hours and periods when the 20-period EMA has moved less than 0.4 ATR over ten bars. The document provides the rules and plotted levels but no trade history, performance statistics, or instrument and timeframe testing. Its two-candle wording describes a test across the current and previous bar, while the code accepts a pierce in either bar rather than requiring a specific two-bar sequence. VWAP session behavior and the time filter may also affect suitability across markets.

Key ideas

• The strategy seeks reversion to VWAP after price pierces an ATR-based deviation band and closes back inside it.
• Entry bands are set 2.5 ATR from VWAP, with stop levels 4 ATR away.
• Trades target VWAP and require a calculated reward of at least 1.5 times risk.
• A New York hour filter and a low-slope EMA filter constrain when signals are eligible.
• The document contains no backtest evidence or cross-market validation.

Tags

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