📚 VWAP Mean Reversion (High Win Rate) - Strategy Education

Learn how this strategy uses 5-factor confluence (80%+ win rate target) to identify high-probability options trades

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Core Strategy Components

🧲 VWAP Mean Reversion Core

Volume-Weighted Average Price acts as a magnetic level. When price deviates 0.8% from VWAP during low volatility, probability favors reversion back to VWAP. This is the foundation.

📉 Low Volatility Filter (ATR Percentile)

Only trade when ATR is below 50th percentile over 20 days. Low volatility = tight ranges = higher mean reversion probability. This filter is non-negotiable for 80%+ win rate.

🔀 RSI Divergence Detection

RSI(14) must show divergence: price makes new extreme but RSI doesn't confirm. This signals exhaustion and imminent reversal. Key confluence for high-probability reversions.

⚖️ Flat Trend Requirement (Slope <0.2%)

Higher timeframe must be ranging, not trending. Max 0.2% slope allowed on 15-minute. Reversions work in sideways markets, not trending markets. This prevents fighting the trend.

📊 Volume Exhaustion Signal

Volume must be decreasing over last 5 bars as price extends from VWAP. Declining volume + price extension = exhaustion = reversal setup. Classic capitulation signal.

🎯 Tight Targets (0.4% / 0.7%)

TP1 = 0.4% (half position), TP2 = 0.7% (VWAP touch). These small targets are hit quickly in mean reversion. Stop = 0.3%. High win rate comes from realistic, tight targets.

⏳ Ultra-Selective (2 Trades/Day Max)

Max 2 signals per day with 30-minute cooldown. Quality over quantity. SPY/QQQ only. This selectivity is why the strategy targets 80%+ win rate. Patience is the edge.

🛡️ High Win Rate Risk Management

0.3% stop loss, 0.4%/0.7% targets = 1.3:1 to 2.3:1 reward/risk. At 80% win rate, this produces consistent profitability. Small stops, small targets, high accuracy.

📊

Visual Trade Example

Here's a real-world example showing how VWAP Mean Reversion (High Win Rate) identifies a high-probability setup:

✓ Confluence Checklist

✓ ✓ VWAP Deviation: SPY trading $576.35, VWAP at $581.10 (-0.82% deviation - exceeds 0.8% minimum)
✓ ✓ Low Volatility: ATR at 32nd percentile (well below 50th - ideal for reversions)
✓ ✓ RSI Divergence: Price making lower low, but RSI making higher low (bullish divergence)
✓ ✓ Flat Trend: 15m slope only 0.12% (range-bound market, not trending)
✓ ✓ Volume Exhaustion: Volume declining over last 5 bars as price extends lower

📋 Step-by-Step Trade Breakdown

1
Low Volatility Environment Confirmed
At 2:15 PM, ATR percentile = 32% (below 50th percentile threshold). Market is quiet and range-bound - perfect conditions for VWAP mean reversion. This is non-negotiable for 80%+ win rate.
2
VWAP Deviation Detected
SPY has drifted 0.82% below VWAP to $576.35 (meets the 0.8% minimum threshold). This creates magnetic tension - probability favors reversion back to VWAP at $581.10. Our entry zone is now active.
3
RSI Divergence Confirms Exhaustion
Price makes a lower low at $576.35, but RSI makes a higher low - classic bullish divergence. Sellers are losing momentum even as price extends lower. Reversal imminent.
4
Entry with Tight Risk
Enter SPY 0DTE $577 CALL at $1.15. Targets: TP1 = $1.20 (0.4% move), TP2 = $1.23 (0.7% VWAP touch). Stop = $1.11 (0.3%). Risk/reward = 2.0:1 with 80%+ historical win rate.
5
Mean Reversion Complete
SPY reverts to $580.70 (0.75% move) within 18 minutes. TP1 hit at $1.21 (exit 50%), TP2 hit at $1.24 (exit remaining 50%). Clean, fast reversion as predicted.

🎯 Example Outcome

Entry Price $1.15 per contract
TP1 Exit $1.21 (50% position)
TP2 Exit $1.24 (50% position)
Average Exit $1.225 per contract
Profit/Loss +$0.075 (+6.52%)
Win/Loss ✅ Winner (TP2 hit)
Holding Time 18 minutes (quick reversion)
Risk/Reward 2.0:1 (textbook mean reversion)
VWAP Touch Price reverted from -0.82% to -0.07% (near-perfect)

⚠️ Educational Note: This is a simplified example for learning purposes. Real market conditions vary, and past examples don't guarantee future results. Always practice proper risk management.

How It All Works Together

VWAP Mean Reversion (High Win Rate) uses 5-factor confluence (80%+ win rate target) before triggering an alert:

All 5 required: VWAP deviation (0.8%) + Low volatility (ATR <50th percentile) + RSI divergence + Flat trend (<0.2% slope) + Volume exhaustion. Max 2 trades/day. Targets: TP1=0.4%, TP2=0.7%, SL=0.3%.

Note: This strategy is designed for educational purposes. Each confluence factor is carefully selected to reduce false signals and improve win rate. Study the components above to understand why each factor matters.

🔬 Interactive Confluence Breakdowns

Click any indicator below to see a detailed visual breakdown with chart examples:

🧲

VWAP Deviation (0.8%+ Minimum)

Price stretched 0.8%+ from VWAP creates magnetic reversion tension.

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📉

Low Volatility Filter (ATR <50th Percentile)

Only trade reversions when market is calm - essential for 80%+ win rate.

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🔍

RSI Divergence Detection

Price makes new extreme but RSI doesn't - exhaustion signal.

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➡️

Flat Trend Filter (<0.2% Slope)

15-minute slope must be near-flat - range-bound is reversion paradise.

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📊

Volume Exhaustion Signal

Declining volume as price extends from VWAP = buyers/sellers exhausted.

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🔬 Live Signal Analysis

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