Volume Weighted Average Price Deviation

Entry Logic

• Entry is a long position when the price pulls back to the second standard deviation band below the VWAP.
• Confirmation is a bullish reversal candle.
• Timeframe is the 5-minute chart.
• Location is at the second standard deviation band.
• Market is in an uptrend.

Exit Logic

• Profit target is the VWAP.
• Scale out 50% at the first standard deviation band.
• Trail the stop loss below the low of the entry candle.
• Exit if the price closes below the second standard deviation band.
• Exit on a bearish reversal pattern.
• Exit if the price does not move up within 6 bars.
• Exit if buying momentum stalls.

Stop Loss Structure

• Hard stop is placed below the low of the entry candle.
• Soft stop is a close below the second standard deviation band.
• Maximum dollar loss is $150 per trade.
• Maximum percent loss is 1.5% of the account.
• Structural stop is below the second standard deviation band.

Risk Management Framework

• Risk 1% of the account per trade.
• Daily loss limit is 3% of the account.
• Weekly loss limit is 6% of the account.
• Maximum drawdown is 20%.
• Risk-reward ratio must be at least 1:1.5.

Position Sizing Model

• Use a fixed fractional position sizing model.
• No volatility adjustment.
• Full size for all setups.
• Do not scale in.
• Scale out as per the exit logic.

Trade Filtering

• Avoid trading in downtrends.
• Only trade when the price is in a clear uptrend.
• Trade only highly liquid instruments.
• Avoid trading during news events.
• Do not trade in choppy markets.

Context Framework

• Trend is up.
• Price is mean-reverting to the VWAP.
• Price is above the 200-period moving average.
• Location is at the second standard deviation band.
• The higher timeframe chart (60-minute) shows a clear uptrend.

Trade Management Rules

• Move stop to breakeven after the first profit target is hit.
• Scale out at the first standard deviation band.
• Do not add to the position.
• Let the trade run to the VWAP.

Time Rules

• Optimal trading window is from 10:00 AM to 3:00 PM EST.
• Avoid trading in the first 30 minutes of the session.
• The strategy works best on trending days with pullbacks.

Setup Classification

• A+ setup: Pullback to the second standard deviation band in a strong uptrend.
• A setup: Pullback to the second standard deviation band in a moderate uptrend.
• B setup: Pullback with low volume.
• C setup: No clear trend.

Market Selection Criteria

• Trade ES, NQ, and CL futures.
• High liquidity is essential.
• Moderate volatility is preferred.

Statistical Edge Metrics

• Expected win rate is 70%.
• Average win is 1.5R.
• Average loss is 1R.
• Profit factor is 1.05.
• Expectancy per trade is 0.05R.

Failure Conditions

• The strategy fails if the trend reverses.
• Avoid trading when the price is breaking away from the VWAP.

Psychological Rules

• Be patient and wait for the price to reach the deviation band.
• Trust the VWAP as a magnet for the price.

Advanced Components

• Use VWAP with standard deviation bands.
• Use a trend filter to confirm the uptrend.
• Do not trade correlated instruments in the same direction.
• The 60-minute chart must confirm the uptrend.

Location

• Strongest in a clear uptrend.
• Weakest in a downtrend or a range-bound market.
• The location of the pullback within the trend is important.