Rolling VWAP + Bands (Tighter Option) + 2.35/3.0 Re-entry Alerts

2月4日

Rolling VWAP + σ Bands — How to Trade It

This indicator plots a Rolling VWAP (a volume-weighted mean over a fixed bar window) along with standard deviation (σ) bands around that VWAP. The goal is simple:
Quantify “normal” price distance from value (VWAP)
Highlight statistical extremes and pullback zones
Trigger re-entry signals when price returns from extreme deviation back inside key bands (±2.35σ and ±3σ)
It’s designed for scalping and short-term decision support, especially on lower timeframes.

What the Lines Mean
VWAP (Rolling Window)
The VWAP line represents the rolling “fair value” of price, weighted by volume across the lookback window.
In ranges: VWAP acts like a gravity center
In trends: VWAP acts like a dynamic mean that price may pull back toward before continuing
σ Bands (Standard Deviation)
The σ bands show how far price is from VWAP in statistical terms:
±1σ: Normal variation
±1.5σ: Common pullback / continuation zone in trends
±2σ: Extended move / trend stress
±2.35σ: Deep extension (often a “stretched” market)
±3σ: Rare extreme (often emotional moves / liquidation wicks)

The Most Important Feature: 2.35σ and 3σ Re-entry Signals
A Re-entry signal fires when price was outside a band on the previous bar and closes back inside that band on the current bar.

Why this matters:
The market pushed into an extreme zone…
…then failed to stay there
That “failure” often leads to a snap-back toward value (VWAP) or at least toward inner bands.
In general, a 3σ re-entry is stronger than a 2.35σ re-entry, because it represents a more statistically extreme excursion that couldn’t hold.
These are not “magic reversal calls” — they’re high-quality mean-reversion triggers when conditions favor mean reversion.

Regime 1: Contracting Bands = Mean Reversion Environment
What contracting bands imply
When the bands tighten / contract, volatility is compressed. In this environment:
Price tends to oscillate around VWAP
Deviations are more likely to mean revert
Extremes are clearer and usually followed by a return toward value

How to trade mean reversion with this indicator
Core idea: fade extremes and target VWAP / inner bands.
A) Highest quality setups: 2.35σ and 3σ re-entries
These are your “strongest” mean reversion events.
Short bias setup
Price closes outside +2.35σ or +3σ
Then re-enters back below that band (signal)
Typical targets: +2σ → +1.5σ → VWAP (depending on momentum)
Long bias setup
Price closes outside −2.35σ or −3σ
Then re-enters back above that band (signal)
Typical targets: −2σ → −1.5σ → VWAP

Why these work best in contraction:
The market is statistically “stretched”
With low volatility, it’s harder for price to stay extended
Re-entry often starts the “snap-back” leg
B) Scaling / partial targets (optional approach)
If you manage positions actively:
Take partial profits at inner bands
Use VWAP as the “magnet” target when conditions remain range-bound

Risk framing for mean reversion
Mean reversion fails when price keeps walking the band and volatility expands.
Common failure clues:
Bands begin to widen aggressively
Price repeatedly holds outside outer bands
VWAP slope starts to accelerate in one direction
If that starts happening, the market is likely shifting to a trend regime.

Regime 2: Expanding Bands + VWAP Slope = Trending Environment
What trending conditions look like
Trends typically show:
VWAP sloping consistently
Bands expanding (higher volatility)
Price spending more time on one side of VWAP
Pullbacks that stall near inner/mid bands instead of reverting fully
In this environment, fading outer bands becomes lower probability because price can “ride” deviations during strong directional flow.

How to trade continuation with this indicator
Core idea: use VWAP and inner bands as pullback zones, then trade in the direction of the VWAP slope.
A) Trend continuation zones (most practical)
VWAP: first pullback level in mild trends
±1σ: shallow pullback continuation
±1.5σ: higher-quality pullback depth in stronger trends
±2σ: deep pullback / trend stress (more caution)

Example (uptrend):
VWAP rising
Price pulls down into VWAP / +1σ / +1.5σ area
Continuation entries are considered when price stabilizes and pushes back with the trend

Example (downtrend):
VWAP falling
Price pulls up into VWAP / −1σ / −1.5σ area
Continuation entries are considered when price rejects and rotates back down

What to do with 2.35σ / 3σ re-entry signals in trends
Re-entry signals can still occur in trends, but they should be interpreted differently:
In strong trends, an outer-band re-entry may only produce a brief bounce/rotation, not a full mean reversion to VWAP.
Targets may be more realistic at inner bands rather than expecting VWAP every time.

In other words:
Range: outer-band re-entries often aim toward VWAP.
Trend: outer-band re-entries often aim toward 2σ / 1.5σ / 1σ first.

Practical Regime Filter (simple visual read)
This script intentionally doesn’t hard-code a “trend/range detector,” but you can visually infer regime quickly:
Mean reversion bias
Bands contracting or stable
VWAP mostly flat
Price crossing VWAP frequently
Trend continuation bias
Bands expanding
VWAP clearly sloped
Price holding mostly on one side of VWAP

Notes on σ Calculation Options
This indicator includes σ mode toggles:
Unweighted σ (tighter): treats price deviations more “purely” and often gives bands that react more tightly to price behavior.
Volume-weighted σ: emphasizes high-volume price action in the deviation calculation.
Both are valid — test based on your market and timeframe.

Summary Cheat Sheet
Contracting bands (range / compression)
Favor: mean reversion
Best signals: 2.35σ and 3σ re-entry
Typical targets: inner bands → VWAP

Expanding bands + sloped VWAP (trend)
Favor: continuation
Use pullbacks to: VWAP / 1σ / 1.5σ as entry zones
Outer-band re-entries: treat as rotation opportunities, not guaranteed full reversals

6月14日

リリースノート

Various fixes.

Added tiers of signals.

Updated to pinescript 6.

6月20日

リリースノート

Several minor changes and also added a 0.25 band as that has been integrated into my trading strategy.

The idea. That black line is a rolling VWAP, volume-weighted average price over 480 bars, so on the 3-minute it's basically the last 24 hours of fair value. Everything else is a standard-deviation envelope around it. The whole premise is that when price gets yanked a long way from that mean, out to two-and-a-third or three standard deviations, it tends to snap back. So we fade the stretch. Sell when price is jammed way above the VWAP and starting to roll over, buy when it's stretched way below and starting to turn. It's a counter-trend, rubber-band trade. The one thing we don't do is pick the exact top or bottom. We wait for the reclaim, where price pokes outside the 2.35 sigma band and then closes back inside it. That close-back-in is the tell that the extreme is exhausting. On the chart that's the triangle marker, and the A/B/C on it is just a confidence grade. A is the cleanest, C is marginal. There are a few ways it can trigger, a straight reclaim, a capitulation wick, a failed breakout back through the 3 sigma line, or a stall-out after sitting in the zone, but it's all the same story. Stretched, now reverting.

The stop, and why it's there. Out past the 3 sigma band, specifically just beyond whichever is further out, the 3 sigma line or the swing high or low the blow-off just printed, with a small ATR cushion on top. That's your "I'm wrong" line. If price is willing to travel past three standard deviations and take out the extreme that just rejected it, then this was never an exhausted stretch. It's a real trend or breakout and the reason for the trade is gone. It's a wide stop on purpose, because you're fading an extreme and you have to let it be messy before it reverts. But it's not arbitrary. It's pinned to the level that actually invalidates the idea.

The targets, and why. Two of them, because the mean is the destination. TP1 is the 1 sigma band, and that's where you take half off. By the time price has come from about 2.35 sigma back to 1 sigma it's done the bulk of the easy snap, and that first leg home is where most of the juice is, so you bank half and take the pressure off. TP2 is the 0.25 sigma band, basically the VWAP itself. That's the runner, going for a full trip back to fair value. We aim at 0.25 rather than the exact mean because that last sliver into the VWAP is where the reversion runs out of gas and chop sets in, so 0.25 sigma is close enough.

Running the trade by hand. This is the part most people skip, and it's the whole game. The VWAP and every band redraw on each new bar, so all your levels are moving, and the strategy wants your orders moving with them. Keep TP1 and TP2 pinned to the live 1 sigma and 0.25 sigma lines instead of parking them at fixed prices. Every bar or two, drag them to where those bands have moved. They breathe both ways. If the mean drifts toward your position the targets follow and you give a little back, if it drifts away they come to you and fill sooner. The target is always the mean, never a stale number.

The stop, meanwhile, ratchets in by stages and never loosens. You start wide at the 3 sigma or swing line. The moment a bar closes back inside the 1.5 sigma band, meaning price has come a real distance home and the reversion is clearly underway, you bring the stop up to the 2 sigma band and trail it there, bar by bar, only ever tighter. Then once TP1 fills and you've got half booked, you tighten the trail again to the 1.5 sigma band for the runner and walk it toward the mean until it either stops you out or tags TP2. The rule underneath all of it is that the original 3 sigma stop never moves out, and the trail only ever sits between it and price. There's always a stop underneath you, you're just walking it in as the trade earns it.
And know when to quit on one. If the snap-back just doesn't come, if price hangs out at the extreme and goes nowhere, don't marry it. Mean reversion that doesn't revert reasonably soon is usually you being early to a trend, and that's the exact trade that eventually runs you over. Give it a couple hours. If it's gone nowhere, cut it.

The one judgment call that matters most. This is a counter-trend tool, so the thing that kills it is a genuinely strong trend, where you keep fading a move that just keeps going. That's why the indicator stays quiet when the trend's too strong. It's watching ADX and standing down. Your discretionary read should be the same. These work best when the tape is balanced and price just got temporarily overstretched. When something's in a clean, powerful one-way move, that stretched look is a trap, not a setup. Let it go.