VWAP Bands Mean-Reversion (Indices/Crypto Intraday)
VWAP bands strategy for intraday mean reversion and trend days.
The one-line takeaway
VWAP acts like an intraday “fair value.” In balanced markets, price often reverts toward VWAP.
Quick Answer
Quick Answer
VWAP (Volume-Weighted Average Price) acts like an intraday “fair value.” In balanced markets, price often reverts toward VWAP. This strategy fades extreme deviations from VWAP using bands, but flips to trend-following rules on strong momentum days.
When to use
- Indices during regular hours
- Liquid crypto pairs during high-volume windows
Setup
- VWAP anchored to session start (or daily VWAP)
- Bands: 1σ and 2σ using standard deviation or ATR-based bands
- Trend filter: if price stays above VWAP and higher highs form, avoid fading.
Rules
- Mean-reversion entry (range day): Long near lower band when momentum slows and a reversal candle prints. Short near upper band similarly.
- Trend-day override: If price holds above VWAP and keeps rejecting VWAP on pullbacks, trade with trend (buy pullbacks), do not fade.
Risk
- Stops beyond band + recent swing
- Take profit at VWAP first, then partial runner to opposite band (optional)
FAQ
What is VWAP?
The average price weighted by volume—often used as an intraday fair value reference.
Why do VWAP fades fail?
Trend days. If you fade strong momentum, you’ll keep getting run over.
Risk note
This article is for educational purposes only and does not constitute financial advice. Options and futures involve substantial risk and are not suitable for all investors. Use defined-risk structures, position sizing, and pre-planned exits.