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VWAP Mean Reversion Strategy

This strategy fades moves away from the volume weighted average price. ATR is used to gauge how far price must deviate from VWAP before a reversal trade is considered.

Testing indicates an average annual return of about 58%. It performs best in the stocks market.

A long position opens when price drops below VWAP by more than K times the ATR. A short is taken when price rallies above VWAP by the same amount. Trades exit as soon as price returns to the VWAP line.

The approach is designed for intraday traders who expect prices to oscillate around VWAP rather than trend strongly. Stops sized as a multiple of ATR help keep losses controlled if the move continues against the trade.

Details

  • Entry Criteria:
    • Long: Close < VWAP - K * ATR
    • Short: Close > VWAP + K * ATR
  • Long/Short: Both sides.
  • Exit Criteria:
    • Long: Exit when close >= VWAP
    • Short: Exit when close <= VWAP
  • Stops: Yes, ATR-based stop.
  • Default Values:
    • K = 2.0m
    • CandleType = TimeSpan.FromMinutes(5)
    • AtrPeriod = 14
  • Filters:
    • Category: Mean Reversion
    • Direction: Both
    • Indicators: VWAP, ATR
    • Stops: Yes
    • Complexity: Intermediate
    • Timeframe: Intraday
    • Seasonality: No
    • Neural networks: No
    • Divergence: No
    • Risk Level: Medium
using System;
using System.Linq;
using System.Collections.Generic;

using Ecng.Common;
using Ecng.Collections;
using Ecng.Serialization;

using StockSharp.Algo.Indicators;
using StockSharp.Algo.Strategies;
using StockSharp.BusinessEntities;
using StockSharp.Messages;

namespace StockSharp.Samples.Strategies;

/// <summary>
/// VWAP Mean Reversion Strategy.
/// Enter when price deviates from VWAP by a certain ATR multiple.
/// Exit when price returns to VWAP.
/// </summary>
public class VwapMeanReversionStrategy : Strategy
{
	private readonly StrategyParam<decimal> _kParam;
	private readonly StrategyParam<DataType> _candleType;
	private readonly StrategyParam<int> _atrPeriod;

	private AverageTrueRange _atr;
	private VolumeWeightedMovingAverage _vwap;
	private decimal _currentAtr;
	private decimal _currentVwap;

	/// <summary>
	/// ATR multiplier for entry.
	/// </summary>
	public decimal K
	{
		get => _kParam.Value;
		set => _kParam.Value = value;
	}

	/// <summary>
	/// Type of candles to use.
	/// </summary>
	public DataType CandleType
	{
		get => _candleType.Value;
		set => _candleType.Value = value;
	}

	/// <summary>
	/// ATR period.
	/// </summary>
	public int AtrPeriod
	{
		get => _atrPeriod.Value;
		set => _atrPeriod.Value = value;
	}

	/// <summary>
	/// Initializes a new instance of the <see cref="VwapMeanReversionStrategy"/>.
	/// </summary>
	public VwapMeanReversionStrategy()
	{
		_kParam = Param(nameof(K), 2.0m)
			.SetGreaterThanZero()
			.SetDisplay("ATR Multiplier", "ATR multiplier for entry distance from VWAP", "Strategy Parameters")
			
			.SetOptimize(1.0m, 4.0m, 0.5m);

		_candleType = Param(nameof(CandleType), TimeSpan.FromMinutes(5).TimeFrame())
			.SetDisplay("Candle Type", "Type of candles to use", "Strategy Parameters");

		_atrPeriod = Param(nameof(AtrPeriod), 14)
			.SetGreaterThanZero()
			.SetDisplay("ATR Period", "ATR indicator period", "Strategy Parameters")
			
			.SetOptimize(10, 20, 2);
	}

	/// <inheritdoc />
	public override IEnumerable<(Security sec, DataType dt)> GetWorkingSecurities()
	{
		return [(Security, CandleType)];
	}

	/// <inheritdoc />
	protected override void OnReseted()
	{
		base.OnReseted();
		_atr = null;
		_vwap = null;
		_currentAtr = default;
		_currentVwap = default;
	}

	/// <inheritdoc />
	protected override void OnStarted2(DateTime time)
	{
		base.OnStarted2(time);


		// Create indicators
		_atr = new AverageTrueRange { Length = AtrPeriod };
		_vwap = new VolumeWeightedMovingAverage { Length = AtrPeriod };

		// Create subscription for candles
		var subscription = SubscribeCandles(CandleType);

		// Bind indicators to candles
		subscription
			.Bind(_atr, ProcessATR)
			.Start();

		// Setup chart visualization if available
		var area = CreateChartArea();
		if (area != null)
		{
			DrawCandles(area, subscription);
			DrawIndicator(area, _atr);
			DrawOwnTrades(area);
		}

		// Enable position protection
		StartProtection(
			takeProfit: new Unit(5, UnitTypes.Percent),
			stopLoss: new Unit(2, UnitTypes.Percent)
		);
	}

	private void ProcessATR(ICandleMessage candle, decimal atr)
	{
		if (candle.State != CandleStates.Finished)
			return;

		try
		{
			_currentVwap = _vwap.Process(candle).ToDecimal();
		}
		catch
		{
			return;
		}

		_currentAtr = atr;
		ProcessStrategy(candle.ClosePrice);
	}

	private void ProcessStrategy(decimal currentPrice)
	{
		// Check if strategy is ready for trading
		if (!IsFormedAndOnlineAndAllowTrading())
			return;

		// Skip if we don't have valid VWAP or ATR yet
		if (_currentVwap <= 0 || _currentAtr <= 0)
			return;

		// Calculate distance to VWAP
		var upperBand = _currentVwap + K * _currentAtr;
		var lowerBand = _currentVwap - K * _currentAtr;

		LogInfo($"Current Price: {currentPrice}, VWAP: {_currentVwap}, Upper: {upperBand}, Lower: {lowerBand}");

		// Entry logic
		if (Position == 0)
		{
			// Long Entry: Price is below lower band
			if (currentPrice < lowerBand)
			{
				// Buy when price is too low compared to VWAP
				LogInfo($"Buy Signal - Price ({currentPrice}) < Lower Band ({lowerBand})");
				BuyMarket(Volume);
			}
			// Short Entry: Price is above upper band
			else if (currentPrice > upperBand)
			{
				// Sell when price is too high compared to VWAP
				LogInfo($"Sell Signal - Price ({currentPrice}) > Upper Band ({upperBand})");
				SellMarket(Volume);
			}
		}
		// Exit logic
		else if (Position > 0 && currentPrice > _currentVwap)
		{
			// Exit Long: Price returned to VWAP
			LogInfo($"Exit Long - Price ({currentPrice}) > VWAP ({_currentVwap})");
			SellMarket(Math.Abs(Position));
		}
		else if (Position < 0 && currentPrice < _currentVwap)
		{
			// Exit Short: Price returned to VWAP
			LogInfo($"Exit Short - Price ({currentPrice}) < VWAP ({_currentVwap})");
			BuyMarket(Math.Abs(Position));
		}
	}
}