Cointegrated VWAP Grid Pullback

Family: pullback · Regime: trending · Complexity: high · Asset classes: Equities, ETFs, Indices · Timeframes: M15, H1

Thesis

Assets that are statistically cointegrated with a primary benchmark (SPY) tend to revert to institutional value areas (VWAP) during periods of high-trend strength (ADX) rather than entering a full trend reversal. By entering on these 'rational' pullbacks within a defined volatility grid, we exploit the behavioral tendency of institutions to defend volume-weighted average price levels in established trends.

Components

• Grid Bot [Grid range plugin] Two Moving Avarages [psyll] (regime) — Defines the 'active trading range'; trades are only initiated when price is within the dynamic grid boundaries to avoid volatility blowouts or illiquid extremes.
• Zero Lag Least Squares Moving Average (ZLSMA) (direction) — Provides a low-lag directional bias, ensuring the trade is aligned with short-to-medium term momentum without the heavy delay of standard MAs.
• VWAP + EMA Cross Pullback (entry) — Identifies high-conviction entries where price retraces to institutional value (VWAP) while remaining in an EMA-defined uptrend.
• Moving Average Convergence Divergence (MACD) (exit) — Captures momentum exhaustion to trigger exits before the trend fully reverses.
• Average True Range (ATR) (risk) — Provides dynamic stop-loss levels and position sizing based on realized market volatility.
• Cointegration (COINTEGRATION) (confirmation) — Acts as a structural filter; trade is only valid if the asset exhibits a statistically significant mean-reverting relationship with the market benchmark (SPY), reducing idiosyncratic risk.
• ADX / Connectable [Azullian] (volatility_filter) — Filters out low-momentum environments; ensures the pullback occurs within a strong trend rather than a decaying range.

Known failure conditions

• Cointegration ADF statistic remains above -2.0 for extended periods (loss of benchmark relationship).
• VWAP and EMA 20 remain intertwined for more than 10 bars (flat regime).
• ADX stays below 20 while price oscillates through the Grid boundaries.

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