Mean reversion
VWAP Reversion
Fade intraday stretches from VWAP back toward the institutional benchmark.
Institutions benchmark against VWAP, so intraday price tends to gravitate back to it. When price stretches to the VWAP standard-deviation bands, a reversion back toward VWAP is a high-probability intraday play.
How it works
Price extended to an upper VWAP band is intraday-overbought relative to the session's volume-weighted average; a reversion targets VWAP itself. Using VWAP position as a bias filter (only fading counter to a weak move, not a strong trend) improves the edge.
Entry rules
- ▸Wait for price to reach an upper/lower VWAP band intraday.
- ▸Fade the move back toward VWAP on signs of rejection.
- ▸Avoid fading a strong, accepted trend away from VWAP.
Exit & risk
- ▸Target VWAP (or the opposite band).
- ▸Stop beyond the band if price accepts there.
- ▸Exit by session end (intraday).
Best for
Liquid intraday instruments (indices, futures, large caps, major crypto). Trend days where price holds one side of VWAP are the main risk.
Build this strategy in Algovex
Every component of this strategy is a node in Algovex — drop them on the canvas, connect the logic, backtest on a real engine, and export to code. No programming required.
Key terms
Frequently asked questions
How do you trade VWAP reversion?
Fade intraday stretches to the VWAP standard-deviation bands back toward VWAP, using VWAP position as a bias filter and standing aside on strong trend days. Algovex provides VWAP with bands so you can backtest this.