VWAP band RSI fade
This intraday futures scalp bets that NIFTY snaps back to its session VWAP after stretching too far from it. When a 5-minute bar closes 0.3% below VWAP with RSI oversold, it buys; when a bar closes 0.3% above VWAP with RSI overbought, it sells. The target is a return to VWAP, with a stop 0.3% away and a forced exit at 15:14.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
The type of day decided everything in this test. On choppy days that swung widely and closed mid-range, the fade worked as intended: 77 trades made ₹91,410 with a 60% win rate, because stretched moves did return to VWAP. On trend days that closed near their high or low, 95 trades lost ₹2,01,700 with a 24% win rate: price ran away from VWAP and kept going, so fades were stopped or held to 15:14 at a loss. Days after India VIX closed above 14.5 lost ₹75,524, and entries in a 20-day downtrend lost ₹62,449.
About this strategy
- Build 5-minute bars of the NIFTY near-month future from 09:15, a 14-bar RSI, and the session VWAP that resets each morning.
- If a bar closing between 09:30 and 15:00 is at least 0.3% below VWAP and RSI is 30 or lower, buy one lot of the future at the next tick.
- If a bar closes at least 0.3% above VWAP with RSI 70 or higher, sell one lot instead.
- Take profit the moment price touches the current VWAP.
- Stop out if price moves 0.3% of the entry price against the trade.
- Close anything still open at 15:14. Hold one trade at a time; a new signal can be taken after an exit.
Why traders use it
VWAP is the average price paid during the day, weighted by volume, and many intraday traders treat it as fair value. When price runs well away from it with an extreme RSI reading, the move looks stretched and a pull back toward VWAP seems likely. The setup gives a clear entry, a natural target and a fixed stop, which makes it a popular scalping idea for index futures.
The year in plain words
On NIFTY futures from 1 Oct 2025 to 30 Sep 2026 with default settings, the strategy made 186 trades, won 42%, and lost ₹91,368 before costs, a profit factor of 0.77. Price returned to VWAP in only 34 trades; 70 hit the 0.3% stop and 82 were still open at 15:14. Wins and losses were similar in size (₹3,926 against ₹3,753), so the low win rate decided the result. March, April and June together lost over ₹76,000, and the maximum drawdown reached ₹1,04,439. After ₹20 per order and bid-ask slippage the loss was ₹1,43,730. In this period, stretches from VWAP more often kept going than reverted.
What the settings do
Risks
- Fading a move means trading against momentum; on trend days several signals in a row can all lose.
- A full NIFTY futures lot moves several thousand rupees for a 0.3% move, so losses add up quickly.
- The target is a moving VWAP, which itself drifts toward price on trend days, so many trades end at the time exit instead.
- Stops are filled at market, so fast moves can cost more than the 0.3% set.
Who it suits
Intraday futures traders exploring mean-reversion ideas who can monitor positions through the day and have the margin for a full NIFTY futures lot. It is useful mainly as a study of when VWAP fades fail.
Questions traders ask
What is a VWAP mean reversion strategy?
It assumes price tends to return to the day's volume-weighted average price after moving far from it. Traders buy when price is well below VWAP and sell when it is well above, aiming to exit when price comes back to VWAP. An oscillator like RSI is often added to confirm the move is stretched.
Is the VWAP band RSI fade profitable?
Not in this test. On NIFTY futures from 1 Oct 2025 to 30 Sep 2026 it lost ₹91,368 before costs and ₹1,43,730 after ₹20 per order and bid-ask slippage (statutory charges not included). Other settings may behave differently, and past results do not guarantee future ones.
Why did so few trades reach VWAP?
When NIFTY trends, price moves away from VWAP and VWAP slowly follows, so the gap rarely closes the same day. In this test only 34 of 186 trades touched VWAP; most were stopped or closed at 15:14.
Why trade futures rather than options for this setup?
Futures move one-for-one with the index and have no time decay, so the result reflects only whether the reversion happened. Option versions of the same idea add premium decay and changing delta, which make the outcome harder to read.