Mean Reversion Entries
Do you fade overextended price moves when price stretches too far from the VWAP?
CommunitySign in to join the conversation
Fading overextended price moves away from the VWAP is a popular mean-reversion strategy, but timing is everything. When price stretches too far from the Volume Weighted Average Price, it often attracts counter-trend traders looking for a snap-back. However, trading strong momentum trends blindly can quickly breach daily loss limits in a prop firm challenge if the market refuses to revert.
Always wait for confirmation, such as a rejection candle or a break of structure, rather than entering just because price looks 'too high' or 'too low'.
Keep your position sizing strict to manage the risk of a runaway trend.
How do you usually filter your VWAP extension entries? Feel free to share your setups below!
