# 2SD VWAP Trading System Checklist ## Setup Process ### 1. Initial Setup - [ ] Open TradingView - [ ] Create two charts side by side - [ ] Left: ES1! 15-minute - [ ] Right: BTC/USDT 15-minute - [ ] Clear all existing indicators ### 2. Add Indicators - [ ] Add VWAP (standard settings) - [ ] Add 2SD bands (using code provided) - [ ] Add ATR (14 period) - [ ] Make VWAP blue, upper band red, lower band green - [ ] Verify indicators are updating correctly ### 3. Alert Setup - [ ] Create band touch alert (upper) - [ ] Create band touch alert (lower) - [ ] Set alerts to 'Once Per Bar' - [ ] Include ATR value in alert message - [ ] Test alerts are working ## Trade Process ### Pre-Trade Checklist - [ ] Alert received - [ ] Check which band was touched - [ ] Note current ATR value - [ ] Calculate position size (Risk/ATR) - [ ] Verify pattern exists: - [ ] Price touched band - [ ] Clear rejection visible - [ ] Room to VWAP exists ### Trade Execution - [ ] Enter after rejection confirms - [ ] Place stop beyond rejection point - [ ] Set target at VWAP - [ ] Record entry details: - [ ] Entry price - [ ] Position size - [ ] Stop level - [ ] Target level - [ ] Monitor for pattern break ## Quick Reference ### Long Setup ๐ŸŸข * โ†’ Touch lower band * โ†’ Rejection upward * โ†’ Target: VWAP * โ†’ Stop: Below rejection ### Short Setup ๐Ÿ”ด * โ†’ Touch upper band * โ†’ Rejection downward * โ†’ Target: VWAP * โ†’ Stop: Above rejection ## Position Sizing Formula ``` Position Size = Account Risk / Current ATR Example: - Risk: $100 - ATR: $2.50 - Position = $100/$2.50 ``` ## Pattern Requirements 1. Clean move to band 2. Clear rejection 3. Room to VWAP 4. No pattern = No trade ## Remember * Pattern exists or doesn't - no maybes * Use ATR for position sizing only * Exit at VWAP or pattern break * Keep it simple --- Note: Check all boxes ([ ]) as you complete each step. Reset checklist for each new trading session. --- Let me check our explicit verification against the original system design and identify any biases or misalignments. ORIGINAL CORE SYSTEM: ``` 1. Basic Elements: - VWAP + 2SD bands - ATR for position sizing - ES 15m primary, BTC 15m secondary 2. Simple Signal: - Price touches 2SD - Rejection occurs - No other conditions needed 3. Position Size: Position = Account Risk / ATR 4. Management: - Exit at VWAP or pattern break ``` IDENTIFIED MISALIGNMENTS/BIASES: 1. Over-Specification: ``` Removed: - "At least 10 bars since last band touch" - "Closes in upper/lower 50% of range" - Specific wick requirements ``` 2. Added Complexity: ``` Removed: - Multiple validation layers - Excessive disqualifiers - Detailed space checks ``` # 2SD VWAP Trading System Checklist ## Setup Process - [ ] Open TradingView - [ ] Create two charts: - ES1! 15-minute - BTC/USDT 15-minute - [ ] Add indicators: - VWAP (standard) - 2SD bands - ATR (14) ## Pattern Verification ### LONG Setup 1. Band Touch: - [ ] Price touches/crosses lower band - [ ] Clean, single move to band 2. Rejection: - [ ] Candle closes back above band - [ ] Clear reversal visible 3. Target Space: - [ ] VWAP visible above - [ ] Clear path to VWAP ### SHORT Setup 1. Band Touch: - [ ] Price touches/crosses upper band - [ ] Clean, single move to band 2. Rejection: - [ ] Candle closes back below band - [ ] Clear reversal visible 3. Target Space: - [ ] VWAP visible below - [ ] Clear path to VWAP ## Trade Implementation ### Position Sizing ``` Position = Account Risk / Current ATR Example: - Risk: $100 - ATR: $2.50 - Position = 40 units ``` ### Entry - [ ] Enter after rejection confirms - [ ] Stop beyond rejection point - [ ] Target at VWAP ### Exit - [ ] Hit VWAP = Exit - [ ] Pattern breaks = Exit - [ ] Stop hit = Exit ## Pattern Examples ### Valid Pattern ``` 1. Clean touch of band 2. Clear rejection 3. Room to VWAP ``` ### Invalid Pattern ``` 1. Multiple touches 2. No clear rejection 3. Blocked path to VWAP ``` ## Core Principles 1. Pattern exists or doesn't 2. No additional conditions needed 3. ATR sizes position 4. VWAP or break exits 5. Keep it simple --- Note: This is a complete checklist. If pattern exists, trade. If not, wait. --- # 2SD/3SD VWAP Trading System Complete System Documentation ## I. System Overview ### Core Concept A mechanical mean reversion system trading rejections from statistical deviation bands back to VWAP. ### Statistical Foundation ``` Price Distribution Zones: - 2SD captures 95% of price movement - 3SD captures 99.7% of price movement - VWAP represents mean price path ``` ## II. Technical Implementation ### Core Calculations ```pine // VWAP and Standard Deviation vwap = ta.vwap stdev = ta.stdev(vwap, 15) atr = ta.atr(14) // Band Calculations upper_2sd = vwap + 2 * stdev lower_2sd = vwap - 2 * stdev upper_3sd = vwap + 3 * stdev lower_3sd = vwap - 3 * stdev // Entry Conditions long_2sd = low <= lower_2sd and close > lower_2sd short_2sd = high >= upper_2sd and close < upper_2sd long_3sd = low <= lower_3sd and close > lower_3sd short_3sd = high >= upper_3sd and close < upper_3sd ``` ### Alert Conditions ```pine // Primary Alerts alertcondition(long_2sd or short_2sd, "2SD Touch + Reject") alertcondition(long_3sd or short_3sd, "3SD Touch + Reject") // Alert Message Format "{{ticker}} - Zone: {{band}} - ATR: {{atr}}" ``` ## III. Trading Mechanics ### Position Sizing ``` 2SD Trades: Position = Risk รท ATR 3SD Trades: Position = (Risk รท ATR) ร— 0.5 Example: Risk = $100 ATR = $2.50 2SD Position = 40 units 3SD Position = 20 units ``` ### Entry Rules ``` 2SD Long: - Price touches lower 2SD band - Candle closes above band - Enter next candle open 2SD Short: - Price touches upper 2SD band - Candle closes below band - Enter next candle open 3SD Rules: - Same entry mechanics - Half position size - Wider stops typical ``` ### Stop Placement ``` All Trades: - Behind rejection candle - Account for volatility - No adjustments after entry ``` ### Target Selection ``` 2SD Trades: - Target = VWAP - Exit on pattern break 3SD Trades: - Primary Target = VWAP - Secondary Target = 2SD band - Exit on pattern break ``` ## IV. Implementation Details ### Python Components ```python class VWAPSystem: def __init__(self): self.lookback = 15 self.atr_period = 14 def calculate_bands(self, data): # VWAP calculation data['vwap'] = self.calculate_vwap(data) # Standard deviation data['stdev'] = data['vwap'].rolling(self.lookback).std() # Band calculations data['upper_2sd'] = data['vwap'] + 2 * data['stdev'] data['lower_2sd'] = data['vwap'] - 2 * data['stdev'] data['upper_3sd'] = data['vwap'] + 3 * data['stdev'] data['lower_3sd'] = data['vwap'] - 3 * data['stdev'] return data def check_signals(self, data): # Entry conditions data['long_2sd'] = (data['low'] <= data['lower_2sd']) & (data['close'] > data['lower_2sd']) data['short_2sd'] = (data['high'] >= data['upper_2sd']) & (data['close'] < data['upper_2sd']) data['long_3sd'] = (data['low'] <= data['lower_3sd']) & (data['close'] > data['lower_3sd']) data['short_3sd'] = (data['high'] >= data['upper_3sd']) & (data['close'] < data['upper_3sd']) return data ``` ### Pine Script Structure ```pine //@version=5 indicator("2SD/3SD VWAP System") // Core calculations vwap = ta.vwap stdev = ta.stdev(vwap, 15) atr = ta.atr(14) // Bands var float[] bands = calculate_bands(vwap, stdev) var float[] signals = check_signals(bands) // Plotting plot(vwap, "VWAP", color=color.blue) plot(bands[0], "Upper 2SD", color=color.red) plot(bands[1], "Lower 2SD", color=color.green) ``` ## V. Process Flow ### Trading Session Flow ``` 1. Setup Phase: โ†’ Load charts (ES 15min, BTC 15min) โ†’ Verify indicators โ†’ Activate alerts 2. Monitoring Phase: โ†’ Wait for alerts โ†’ Identify band touch โ†’ Confirm rejection 3. Execution Phase: โ†’ Calculate position size โ†’ Place entry order โ†’ Set stop loss โ†’ Set target 4. Management Phase: โ†’ Monitor for target hit โ†’ Watch for pattern break โ†’ Exit on either condition ``` ### Decision Tree ``` Alert Received โ†“ Check Zone (2SD or 3SD) โ†“ Verify Rejection โ†“ Calculate Position โ†“ Execute Trade โ†“ Monitor to Exit ``` ## VI. System Rules Summary ### Core Rules 1. Trade rejections only 2. Size by ATR 3. Enter after rejection 4. Exit at target or break 5. No exceptions ### Position Rules 1. 2SD = full size 2. 3SD = half size 3. No averaging 4. No scaling ### Exit Rules 1. Hit VWAP = win 2. Pattern breaks = exit 3. Stop hit = exit 4. No adjustments ## VII. Implementation Checklist ### Setup - [ ] Install indicators - [ ] Configure alerts - [ ] Test calculations - [ ] Verify data feed ### Trading - [ ] Monitor alerts - [ ] Check zone - [ ] Calculate position - [ ] Execute mechanically - [ ] Record results --- End of Documentation. --- Let me create a React component version of the checklist that will render properly. ```tsx import React from 'react'; import { Card, CardHeader, CardTitle, CardContent } from '@/components/ui/card'; const TradingChecklist = () => { return (
2SD/3SD VWAP Trading System Checklist

Pre-Session Setup

TradingView Charts

  • โ˜ ES1! 15-minute
  • โ˜ BTC/USDT 15-minute

Indicators

  • โ˜ VWAP (blue)
  • โ˜ 2SD bands (red upper, green lower)
  • โ˜ 3SD bands (visible)
  • โ˜ ATR (14 period)

Alerts

  • โ˜ 2SD touches
  • โ˜ 3SD touches
  • โ˜ Once per bar
  • โ˜ ATR value included

Trading Process

On Alert

  • โ˜ Identify zone hit (2SD or 3SD)
  • โ˜ Verify rejection candle
  • โ˜ Note current ATR

Position Sizing

  • โ˜ 2SD: Risk รท ATR
  • โ˜ 3SD: (Risk รท ATR) ร— 0.5

Pattern Reference

2SD Long

  • โ˜ Price touches lower 2SD
  • โ˜ Candle closes above band
  • โ˜ Clear path to VWAP
  • โ˜ Full position size

2SD Short

  • โ˜ Price touches upper 2SD
  • โ˜ Candle closes below band
  • โ˜ Clear path to VWAP
  • โ˜ Full position size

3SD Long

  • โ˜ Price touches lower 3SD
  • โ˜ Candle closes above band
  • โ˜ Path to VWAP/2SD clear
  • โ˜ Half position size

3SD Short

  • โ˜ Price touches upper 3SD
  • โ˜ Candle closes below band
  • โ˜ Path to VWAP/2SD clear
  • โ˜ Half position size

Exit Rules

2SD Trades

  • โ˜ Hit VWAP = Take profit
  • โ˜ Pattern breaks = Exit
  • โ˜ Stop hit = Exit

3SD Trades

  • โ˜ Hit VWAP/2SD = Take profit
  • โ˜ Pattern breaks = Exit
  • โ˜ Stop hit = Exit

Key Reminders

  • โ€ข No additional filters
  • โ€ข No timeframe restrictions
  • โ€ข No extra indicators
  • โ€ข Pattern exists or doesn't
  • โ€ข Next setup always comes
Alert โ†’ Pattern โ†’ Size โ†’ Trade โ†’ Exit
Everything else is noise.
); }; export default TradingChecklist; ``` --- The half position size at 3SD is based on statistical principles and risk management, but let me analyze this in detail. # 3SD Position Size Analysis ## Statistical Context ``` Price Distribution: 2SD = 95% of moves (1 in 20 events) 3SD = 99.7% of moves (1 in 370 events) Current Rule: 2SD = Full size (Risk/ATR) 3SD = Half size (Risk/ATR ร— 0.5) ``` ## Examining The Logic ### Arguments FOR Half Size 1. Volatility Consideration - 3SD moves indicate higher volatility - May need wider stops - Higher ATR during these moves 2. Statistical Rarity - Much rarer events - Less historical precedent - Harder to validate pattern 3. Risk of Continuation - Strong momentum to reach 3SD - Could signal trend change - Higher probability of continuation ### Arguments AGAINST Half Size 1. Violates System Mechanics - Adds complexity - Introduces discretion - Breaks ATR sizing logic 2. Statistical Edge - Stronger mean reversion potential - Clearer extreme condition - More defined edge 3. ATR Already Adjusts - Higher volatility = Higher ATR - Position size naturally reduces - Built-in risk management ## Position Sizing Reality ``` Example with $100 Risk: Normal Market: ATR = $2.50 2SD Position = $100/$2.50 = 40 units 3SD Position = $100/$2.50 ร— 0.5 = 20 units High Volatility Market: ATR = $5.00 2SD Position = $100/$5.00 = 20 units 3SD Position = $100/$5.00 ร— 0.5 = 10 units BUT: ATR is likely already higher at 3SD! If ATR = $5.00 at 3SD naturally: Position = $100/$5.00 = 20 units (Natural reduction without arbitrary halving) ``` ## Recommendation ### Remove Half-Size Rule ``` New Rule: Position = Risk รท ATR Reasoning: 1. ATR captures volatility 2. Keeps system mechanical 3. Removes complexity 4. Maintains consistency ``` ### Updated Position Logic ``` ALL Trades (2SD and 3SD): 1. Note current ATR 2. Calculate Position = Risk รท ATR 3. Place trade 4. No additional adjustments ``` ## Key Points 1. ATR naturally adapts to volatility 2. System should remain mechanical 3. Arbitrary adjustments add bias 4. Consistency breeds confidence ## Conclusion The half-size rule at 3SD appears to be: 1. Redundant (ATR already adjusts) 2. Adds complexity 3. Breaks mechanical nature 4. Introduces bias Recommendation: Remove the half-size rule and maintain pure ATR-based sizing for all trades. --- Remember: The best trading system is one you can execute consistently. Adding rules needs strong justification. After this analysis, I believe we should: 1. Remove the half-size rule 2. Let ATR handle volatility naturally 3. Maintain system simplicity 4. Keep position sizing mechanical Would you like me to: 1. Update the system documentation? 2. Provide example calculations? 3. Add risk analysis metrics? 4. Detail volatility adjustments? The goal is to keep the system purely mechanical while letting the ATR handle position sizing naturally.