VWAP Structural Reversion System

Family: pullback · Regime: trending · Complexity: medium · Asset classes: Equities, Forex, Crypto · Timeframes: M15, H1

Thesis

The strategy assumes that institutional players use VWAP as a 'fair value' anchor during trends. When price deviates significantly but returns to VWAP while the broader trend (ALMA) and candle breadth (ADR_B) remain intact, those institutions are likely to defend their positions, creating a high-probability bounce. The Bollinger Bands ensure we are only trading in a high-volatility/trending regime to avoid the 'flat' VWAP traps.

Components

• Bollinger Bands (Standard) (regime) — Used to define the volatility regime; trades are only taken when the bands are expanding or price is outside the mid-line to ensure sufficient momentum.
• Arnaud Legoux Moving Average (ALMA) (direction) — Provides the primary trend filter by smoothing price action with minimal lag, ensuring the entry is aligned with the short-to-medium term direction.
• VWAP + EMA Cross Pullback (entry) — Identifies institutional value areas; the entry triggers when price 'tests' the VWAP while the fast EMA maintains its trend-aligned position.
• Average True Range (NNFX) (exit) — Provides a volatility-adjusted exit mechanism (take profit) to account for varying market ranges.
• Pivot Points Reversal Levels (risk) — Uses local price pivots to set hard stop-loss levels based on established market structure rather than arbitrary percentages.
• Advance/Decline Ratio (Bars) (confirmation) — Confirms the quality of the move by ensuring the majority of candles in the recent lookback are moving in the direction of the trade (breadth confirmation).
• Indicator Sample Skeleton (volatility_filter) — Acts as a system health check; ensures the strategy only runs when a minimum threshold of historical bars (iBars) is available for indicator stability.

Known failure conditions

• Sustained period of 'choppy' price action where VWAP and EMA 20 are frequently oscillating.
• Volatility contraction (Bollinger Band Squeeze) lasting longer than 50 bars.
• Pivot Points failing to provide levels within 3x ATR of entry price (excessive risk).

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