New edge proposed: vwap_deviation_mean_reversion — E8 Intelligence Research

Abstract

{ "name": "vwap_deviation_mean_reversion", "source": "Linda Raschke / Market Wizard literature - VWAP mean reversion", "type": "entry_engine", "rule": "Go long when price closes below VWAP by at least 1.2 ATR and the next candle opens inside the lower 20% of prior candle range; go short when price closes above VWAP by at least 1.2 ATR and the next candle opens inside the upper 20% of prior candle range.", "pseudocode": "vwap = sum(price*volume)/sum(volume) for each bar; // rolling from session start\nif close < vwap - 1.2*atr(14) and open_next <= low + 0.2*(high-low):\n enter long at open_next\nif close > vwap + 1.2*atr(14) and open_next >= high - 0.2*(high-low):\n enter short at open_next", "why_it_works": "Extreme deviation from VWAP attracts mean-reverting flow, and the narrow re-entry range confirms fading of the impulsive move." } Author: Andrew Stewart Caldin, Independent Researcher, UK. Part of the E8 Intelligence Research series. Platform: e8intelligence.com