VWAP + Order Flow Combo

Entry Logic

• Long entry: Price pulls back to VWAP from above, order flow shows absorption with large bids appearing on the tape and delta turning positive. Entry on the first green candle close above VWAP.
• Short entry: Price rallies to VWAP from below, order flow shows absorption with large asks appearing on the tape and delta turning negative. Entry on the first red candle close below VWAP.
• Confirmation: Cumulative delta divergence, volume imbalance on the footprint chart.
• Timeframe: 5-minute chart for context, 1-minute chart for entry.
• Location: Entry must be at or very near the VWAP level.
• Market Condition: Trending or range-bound with clear VWAP respect.

Exit Logic

• Profit Target: 2R or the next significant support/resistance level.
• Scaling Out: Scale out 50% at 1R, move stop to breakeven.
• Trailing Stop: Trail stop below the 5-period EMA on the 1-minute chart.
• Signal Failure: Exit if price closes back across VWAP with strong opposing order flow.
• Opposite Signal: Exit on a valid opposite signal.
• Time Expiration: Exit if the trade is not profitable within 60 minutes.
• Momentum Loss: Exit if volume dries up and price goes into a tight range.

Stop Loss Structure

• Hard Stop: 10 cents below the entry candle's low for longs, 10 cents above for shorts.
• Soft Stop: A close back across VWAP with strong opposing order flow.
• Max Dollar Loss: $100 per trade.
• Max Percent Loss: 0.5% of account.
• Structural Stop: Below the most recent swing low for longs, above for shorts.

Risk Management Framework

• Risk Per Trade: 0.5% of account.
• Daily Limit: 3 losing trades.
• Weekly Limit: 5% drawdown.
• Max Drawdown: 10%.
• R:R Requirement: Minimum 2:1.

Position Sizing Model

• Sizing Approach: Fixed fractional, 0.5% of account at risk.
• Volatility Adjustment: Reduce size if ATR is 50% above its 20-period average.
• Conviction Sizing: A+ setups get 0.75% risk, B setups get 0.25%.
• Scaling In: Not recommended for this strategy.
• Scaling Out: Scale out 50% at 1R.

Trade Filtering

• Market Conditions: Avoid choppy, low-volume markets.
• Setups: Only take setups with clear order flow confirmation.
• Instruments: High-volume stocks and ETFs.
• Time Restrictions: First two hours of the trading day.
• Chop/News Avoidance: Avoid trading during major news events.

Context Framework

• Trend Direction: Trade in the direction of the daily trend.
• VWAP Relationship: Price must be reacting to VWAP.
• MA Relationship: Price should be on the correct side of the 50 SMA on the daily chart.
• Range Location: In a range, fade the edges back to VWAP.
• Higher TF Alignment: 1-hour chart should show a clear trend.

Trade Management Rules

• Breakeven: Move stop to breakeven after 1R of profit.
• Scale Out: Scale out 50% at 1R.
• Add Size: Not recommended.
• Fast vs Slow Moves: Let fast moves run, take profits on slow moves.

Time Rules

• Optimal Window: 9:30 AM - 11:30 AM EST.
• Times to Avoid: Mid-day chop from 12:00 PM - 2:00 PM EST.
• Session Notes: Strategy performs best in the morning session.

Setup Classification

• A+ Setup: Perfect VWAP touch, strong order flow confirmation, and higher timeframe alignment.
• A Setup: Good VWAP touch, decent order flow, some higher timeframe alignment.
• B Setup: VWAP touch but messy order flow.
• C Setup: No clear VWAP touch or order flow confirmation.

Market Selection Criteria

• Instruments: SPY, QQQ, IWM, and high-volume stocks.
• Volume: Minimum 1 million shares traded daily.
• Volatility: ATR should be at least 0.5% of the stock price.

Statistical Edge Metrics

• Win Rate: 55%.
• Avg Win: 2R.
• Avg Loss: 1R.
• Profit Factor: 1.65.
• Expectancy: 0.3R per trade.

Failure Conditions

• Market Conditions: Fails in very strong, one-directional trends where price does not pull back to VWAP.
• Specific Scenarios: Fails when order flow signals are misleading (spoofing).

Psychological Rules

• Mental Discipline: Must be patient and wait for the setup to come to you. Do not chase.

Advanced Components

• Regime Detection: Use a 200-period SMA on the daily chart to determine the overall market regime.
• Filters: Filter out trades where the VIX is above 30.
• Correlation: Avoid taking trades on highly correlated instruments at the same time.
• MTF Alignment: 1-hour, 15-minute, and 5-minute charts should all be in alignment.

Location

• Strongest: At the first pullback to VWAP after a strong trend move.
• Weakest: In choppy, low-volume markets.