VWAP Breakout + Retest Trend Strategy

Strategy Idea

This strategy focuses on trading continuation moves that occur after price breaks away from the Volume Weighted Average Price (VWAP) and then retests it.

VWAP is commonly used to represent the average traded price during a session. When price moves away from this level and later returns to it, the area can act as a dynamic support or resistance level.
The script attempts to capture trend continuation when price breaks VWAP and then confirms the move with a retest.

How the Strategy Works

1. VWAP Breakout
The first step is identifying when price moves above or below the VWAP line.

• Price crossing above VWAP suggests bullish momentum.
• Price crossing below VWAP suggests bearish momentum.

This initial move signals potential directional interest.

2. Retest Confirmation
Instead of entering immediately on the breakout, the strategy waits for price to pull back toward VWAP.
This retest helps confirm whether the VWAP level is acting as support or resistance.

3. Trend Alignment
To reduce counter-trend trades, a trend filter using an exponential moving average (EMA) is applied.

• Price above the trend EMA favors long trades.
• Price below the trend EMA favors short trades.

4. Risk Management
Stop-loss and take-profit levels are based on ATR (Average True Range).
This allows exits to adapt to market volatility rather than using fixed distances.

Key Features

• VWAP-based market structure
• Retest confirmation before entry
• Trend filter using EMA
• ATR-based dynamic risk management
• Designed for testing and educational purposes

When This Strategy May Work Better

This type of approach may perform better in:

• intraday trending markets
• instruments with strong liquidity
• sessions where price frequently reacts to VWAP levels

It may perform less effectively during low-volatility or sideways market conditions.

//@version=6
strategy(
    "VWAP Breakout Retest Trend Strategy",
    overlay = true,
    initial_capital = 100000,
    default_qty_type = strategy.percent_of_equity,
    default_qty_value = 3,
    commission_type = strategy.commission.percent,
    commission_value = 0.05,
    slippage = 1
)


// Inputs
emaLen  = input.int(100, "Trend EMA Length")
atrLen  = input.int(14, "ATR Length")
atrMult = input.float(1.8, "ATR Stop Multiplier")
rr      = input.float(2.0, "Risk Reward")


// Indicators
vwapValue = ta.vwap(close)
emaTrend  = ta.ema(close, emaLen)
atrVal    = ta.atr(atrLen)


// Trend Direction
trendUp   = close > emaTrend
trendDown = close < emaTrend


// Breakout Detection
breakUp   = ta.crossover(close, vwapValue)
breakDown = ta.crossunder(close, vwapValue)


// Retest Conditions
retestLong  = low <= vwapValue and trendUp
retestShort = high >= vwapValue and trendDown


// Entry Conditions
longCondition  = breakUp[1] and retestLong
shortCondition = breakDown[1] and retestShort


if longCondition and strategy.position_size == 0
    strategy.entry("Long", strategy.long)


if shortCondition and strategy.position_size == 0
    strategy.entry("Short", strategy.short)


// Risk Management
longStop  = strategy.position_avg_price - atrVal * atrMult
longTarget = strategy.position_avg_price + atrVal * atrMult * rr


shortStop  = strategy.position_avg_price + atrVal * atrMult
shortTarget = strategy.position_avg_price - atrVal * atrMult * rr


strategy.exit("Long Exit", from_entry="Long", stop=longStop, limit=longTarget)
strategy.exit("Short Exit", from_entry="Short", stop=shortStop, limit=shortTarget)


// Visuals
plot(vwapValue, title="VWAP", color=color.orange, linewidth=2)
plot(emaTrend, title="Trend EMA", color=color.blue)