u/AI_WILL_BURST

I’ve been exploring a rule-based intraday strategy that avoids chasing the open. It only enters after price compresses, reclaims fair value, and receives volume confirmation.

I’m calling it the Volatility Compression + Anchored VWAP Reclaim (VCVR) strategy.

The hypothesis: some cleaner intraday trends begin after early volatility contracts and price reclaims anchored VWAP with expanding relative volume. Instead of predicting direction at the opening bell, the algorithm waits for the market to show acceptance above fair value.

Proposed long-entry rules:

1. Skip the first 30 minutes after the market opens.
2. The latest six-bar range must be below 0.65 × the 20-bar ATR.
3. Price must close above session anchored VWAP after trading below it during at least one of the previous three bars.
4. Relative volume must exceed 1.25 compared with the same time-of-day average.
5. The benchmark must be above its session VWAP to avoid trading against the broader intraday trend.
6. Enter on the next bar only if the spread is below a preset maximum.

Exit and risk rules:

• Initial stop: 1.2 × ATR below entry.
• First target: 1.8R.
• Move the stop to breakeven after 1R.
• Exit if two consecutive bars close below anchored VWAP.
• Close remaining positions 15 minutes before market close.
• Risk 0.25% of equity per trade.
• Maximum two trades per symbol per day.
• Stop trading after a 1% daily drawdown.

The attached graph is an illustrative normalized equity path—not an actual backtest result. It demonstrates the behavior I would want to test: fewer entries during noisy periods, controlled drawdowns, and returns that do not depend on one isolated month.

Real results could be materially worse after commissions, spreads, slippage, and execution latency.

Before trusting this algo trading strategy, I would test it using walk-forward validation, unseen symbols, different volatility regimes, realistic transaction costs, and parameter-sensitivity analysis. I would also compare it against buy-and-hold and an unfiltered VWAP-reclaim baseline.

Questions for the group:

1. Which rule appears most vulnerable to overfitting: ATR compression, relative volume, or the two-close VWAP exit?
2. Would you anchor VWAP at the session open, opening swing, or previous day’s high/low?
3. Does benchmark confirmation add useful context, or only introduce lag?
4. How would you model slippage for liquid versus mid-cap stocks?
5. Would this strategy make more sense on 5-minute, 15-minute, or event-based bars?
6. Which market-regime filter would you add—or deliberately avoid?
7. What evidence would convince you that this algorithm has a genuine edge instead of a lucky backtest?

I’m particularly interested in failure cases. If you were reviewing this quantitative trading system, what would you try to break first?