Profits when price deviates from VWAP and reverts back toward it
| Strategy Type | VWAP Mean-Reversion / Intraday Reversal Trading |
| Market Outlook | Profits when price deviates from VWAP and reverts back toward it |
| Risk Profile | Moderate - counter-trend entries require discipline; defined stops |
| Reward Profile | Captures intraday reversion moves; typically 1.5-2× risk targets |
| Time Horizon | Intraday (minutes to hours; positions closed by session end) |
| Iv Environment | Best on ranging days with mean-reverting behavior; less effective on strong trend days |
| Breakeven | Price reverts toward VWAP sufficiently to cover spread and reach target |
| Primary Instruments | Spot Silver CFD (XAGUSD), COMEX Silver Futures (SI), Micro Silver (SIL) |
| Fca Compliance | Standard intraday trading; no special restrictions |
| Contract Specifications | Variable per broker, typically $1-10 per $0.01 move • $50 per $0.01 (5,000 oz contract) • $10 per $0.01 (1,000 oz contract) |
| Silver Vwap Characteristics | 20-60 cents from VWAP during session • Silver typically touches VWAP 3-8 times per session • Mid-session when initial momentum fades • Silver respects VWAP well on non-trend days |
| Uk Access Methods | Tax-free, VWAP available on most platforms • Flexible sizing, good for VWAP intraday • SI/SIL with native VWAP on professional platforms |
| Vwap Availability | Available on TradingView, IG, CMC, most professional platforms |
| Margin Requirements | SI: ~$14,000. SIL: ~$2,800. CFDs: 5-10%. Day trading margins often lower. |
5-minute chart is most common for VWAP reversals. It provides enough detail to see reversal candles while not being too noisy. 15-minute can work for less frequent but cleaner signals. Avoid 1-minute (too noisy) or 1-hour (too slow for intraday).
Most platforms have built-in VWAP indicators. TradingView: Add Indicator → VWAP. IG/CMC: Drawing Tools → VWAP. Ensure it includes standard deviation bands (1 and 2 SD). Set anchor to session start (e.g., 13:30 GMT for US session).
Yes, on range days you might get long reversals at the lower band AND short reversals at the upper band in the same session. Each is an independent trade. Just ensure each meets all confirmation criteria and size appropriately.
Wait for the reversal candle. Price can stay at or push through bands before reversing. Entering without confirmation increases failure rate. Patience is essential for counter-trend trading. If no candle forms, no trade.
Trend days are the main reason - price can stay one side of VWAP all day. Also: insufficient confirmation, news changing fair value, or simply market randomness. Expect 35-45% of reversals to fail even with good setups.
Watch first 2 hours. If price stays consistently one side of VWAP and VWAP is sloping strongly, it's likely a trend day. If VWAP is touched 2+ times and is relatively flat, it's likely a range day. Also watch if reversals at bands are working or failing.
2 SD is higher probability but less frequent. 1.5 SD is more frequent but requires stronger confirmation. Many traders: full size at 2 SD, half size at 1.5 SD. Or: only trade 1.5 SD when confluence exists, trade 2 SD with standard confirmation.
Major news can shift fair value, making pre-news VWAP irrelevant. Close positions before high-impact news. After news, wait 15-30 minutes for new VWAP to establish before resuming. Minor news usually fine.
If price doesn't revert toward VWAP within 2 hours of entry, exit at market. The reversion thesis may be wrong or it's becoming a trend day. Also exit all positions by session end regardless of P&L.
Session VWAP is primarily for intraday. For multi-day, use Anchored VWAP from significant swing points or weekly VWAP. However, VWAP mean-reversion is fundamentally an intraday concept since VWAP resets daily.
Look for delta divergence (price extreme but delta not confirming), absorption (large orders holding level), or climax volume (exhaustion spike) at VWAP bands. These order flow signals confirm the reversal candle pattern. Use footprint charts or cumulative delta.
High volatility: Use 2.0-2.5 SD bands (wait for greater extremes). Low volatility: Use 1.0-1.5 SD bands (smaller deviations are significant). Monitor ATR vs average to identify regime. Adjust parameters before trading, not during.
Use 5-minute data, 3-5 years minimum. Include 2-3 cent spread assumption. Define all rules precisely (band level, confirmation criteria, stops, targets). Track by day type (range vs trend separately). Expect 55-65% win rate, 1.4-1.8 profit factor.
Maximum 2-3 to avoid chart clutter. Suggested: One from most recent significant swing high, one from most recent significant swing low, optionally one from start of week. Where these cluster with session VWAP bands = highest probability zones.
Standard approach: 50% at VWAP (secure profit), trail remaining 50% toward opposite band with stop at VWAP. Advanced: 33% at VWAP, 33% at opposite 1 SD, 33% trail to opposite 2 SD. This captures both certainty and full reversion potential.
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