VWAP Trend

The rules

Zarattini and Aziz (2023). VWAP, the session's volume-weighted average price, is the running sum of (high + low + close) / 3 times volume divided by the running sum of volume over the session's one-minute bars, regular hours only. After the first one-minute bar closes, at 09:31, go long if price is above VWAP and sell short if it is below. Close and reverse only when a one-minute bar closes on the other side of VWAP, so from 09:31 the strategy is always long or short. Nothing is held overnight; positions close at 16:00. Size: 100% of available equity with no leverage. Test: $25,000, $0.0005 a share commission, no slippage (every fill at the quoted price).

Universe

QQQ

Bars

1-minute

Position size

97% of equity in QQQ, long or short. Published: 100% of available equity, no leverage.

Rebalance

Every minute, flat at the close. Published: the same, with 21,967 trades over 2018-2023 (about 15 a session, derived).

What the research found

Zarattini and Aziz (SSRN 4631351, November 2023), who do not regard the rule as a fully developed trading system and note that significantly higher commissions can affect it, tested QQQ on one-minute bars from 2 January 2018 to 28 September 2023, charging $0.0005 a share and no slippage. The rule returned 671% (43% a year, Sharpe 2.1, maximum drawdown 9.4%) over 21,967 trades (about 15 a session, derived), 17% of them profitable, against 126% (Sharpe 0.7, drawdown 35.6%) for holding QQQ. On TQQQ, a fund that seeks three times the Nasdaq-100's daily return, the rule returned 8,242% (Sharpe 1.7, drawdown 36.1%). The paper describes the effect as buying or selling pressure, measured against VWAP, carrying on into the following minutes. The authors' 2024 SPY paper cites the rule as momentum applied to intraday trading, beside Gao, Han, Li and Zhou (Journal of Financial Economics 2018), who found the market's first half-hour return predicting its last half-hour, and Li, Sakkas and Urquhart (Journal of Financial Markets 2022), who found intraday momentum significant in most of 16 developed markets. A QuantConnect reproduction that Evgenii Lazarev posted to its forum, at the paper's costs over the same dates, returned 592.88% (Sharpe 1.754); its notes state, without showing results, that the Sharpe falls toward 0.7 from September 2023 and that the edge breaks even below about 1 basis point a round trip (0.01%), and his post finds it much less attractive beyond the paper's dates and after paying a realistic gap between buying and selling prices. In a September 2026 study, Telonics Trading, which sells trading software, reproduced a Sharpe of 1.91 over May 2018 to September 2023 at zero slippage; one cent of slippage a fill cut it to 0.10 and the return from 458% to 1%. It puts the average trade at about 2.5 cents a share before costs, and from October 2023 to September 2026, even at zero slippage, the rule returned 28% (Sharpe 0.63) against 100% for holding QQQ. The library charges 0.05% a fill, about 17 to 38 cents a share on QQQ, which traded at roughly $350 to $760 over the window, on about 30 fills a session at the paper's rate.

Results

Hypothetical: a backtest with modeled costs, not traded with real money.

Hypothetical growth of $10,000

Rebuild it in Orbital

Paste this into Orbital Chat. The Strategy Developer builds the workflow and asks before it runs any backtest.

Build a program on 1-minute bars for QQQ, using the session clock. Each session, keep a VWAP from 09:30: the running sum of (high + low + close) / 3 times volume, divided by the running sum of volume, updated with each bar as it closes, before deciding on that bar. If flat, buy QQQ with 97% of equity when a bar closes above VWAP, or sell it short with 97% of equity when a bar closes below. If long and a bar closes below VWAP, sell the position; if short and a bar closes above VWAP, buy to cover. The flat rule applies again from the next bar, so a close still across VWAP takes the other side one minute after the exit. Make no new entries after the 15:58 bar (12:58 on early-close days), and close any position when the bar before the closing-print minute closes (15:59, or 12:59 on early-close days). Use a margin account so it can sell short. Backtest the last 3 years with $100,000.

Is it real?

Strategies tested together

10

Beta to SPY

0.03

Alpha vs SPY

−174.7% a year

Costs paid

$99,860, 23160% of the gain before costs

Data

1m decisions on 1-minute bars, 754 sessions

Fills

Next open at market, sized at the fill

Read this before you trust it

Each reversal is an exit at the next minute's open and the opposite entry one minute later, so the position is flat for about a minute at each cross. Every fill pays 0.05% slippage, where the paper charged $0.0005 a share and no slippage; at the paper's rate, about 15 trades a session (derived), that is about 30 fills a session. The end-of-day exit fills at the open of the 16:00 closing-print minute (13:00 on early-close days). Only QQQ runs; the version on TQQQ, a three-times-levered fund, is left out. 97% of equity, leaving room for costs. Shorts need a margin account.

Sources