Educational content — not financial advice. Past behaviour of a setup does not guarantee future results. Practise in demo first and never risk more than your plan allows.
Institutional logic
The Volume-Weighted Average Price (VWAP) is the benchmark execution desks use to judge fill quality. When price stretches far from VWAP during lower-volatility hours, aggressive buying or selling tends to pause and price often reverts toward the benchmark.
Setup rules
- Attach the daily session VWAP with ±1, ±2 and ±3 standard deviation bands.
- Wait for price to stretch violently beyond the ±2.5 or ±3.0 band (overbought above, oversold below).
- Confirm exhaustion with RSI (below 30 for a long, above 70 for a short, ideally with divergence) or volume delta dropping off sharply at the extreme band.
- Wait for price to close back inside the 2.0 standard deviation band.
Entry trigger
Market entry on the candle close back inside the 2.0 SD band.
Stop loss
Beyond the extreme swing high/low formed outside the band.
Take profit
Primary target: the session VWAP centre line. Target R:R 1:2.0 to 1:3.0.