VWAP Volatility Reversal Strategy with Standard Deviation Channel Breakout System

/*backtest
start: 2025-01-20 00:00:00
end: 2025-02-19 00:00:00
period: 1h
basePeriod: 1h
exchanges: [{"eid":"Binance","currency":"ETH_USDT"}]
*/

//@version=6  
strategy("VRS Strategy", overlay=true)  

// Calculate VWAP  
vwapValue = ta.vwap(close)  

// Calculate standard deviation for the bands  
stdDev = ta.stdev(close, 20) // 20-period standard deviation for bands  
upperBand = vwapValue + stdDev  
lowerBand = vwapValue - stdDev  

// Plot VWAP and its bands  
plot(vwapValue, color=color.blue, title="VWAP", linewidth=2)  
plot(upperBand, color=color.new(color.green, 0), title="Upper Band", linewidth=2)  
plot(lowerBand, color=color.new(color.red, 0), title="Lower Band", linewidth=2)  

// Signal Conditions  
var float previousGreenCandleHigh = na  
var float previousGreenCandleLow = na  
var float previousRedCandleLow = na  

// Detect bearish candle close below lower band  
bearishCloseBelowLower = close[1] < lowerBand and close[1] < open[1]  

// Detect bullish reversal candle after a bearish close below lower band  
bullishCandle = close > open and low < lowerBand // Ensure it's near the lower band  
candleReversalCondition = bearishCloseBelowLower and bullishCandle  

if (candleReversalCondition)  
    previousGreenCandleHigh := high[1]  // Capture the high of the previous green candle  
    previousGreenCandleLow := low[1]     // Capture the low of the previous green candle  
    previousRedCandleLow := na            // Reset previous red candle low  

// Buy entry condition: next candle breaks the high of the previous green candle  
buyEntryCondition = not na(previousGreenCandleHigh) and close > previousGreenCandleHigh  

if (buyEntryCondition)  
    // Set stop loss below the previous green candle  
    stopLoss = previousGreenCandleLow   
    risk = close - stopLoss // Calculate risk for position sizing  

    // Target Levels  
    target1 = vwapValue // Target 1 is at VWAP  
    target2 = upperBand  // Target 2 is at the upper band  

    // Ensure we only enter the trade near the lower band  
    if (close < lowerBand)  
        strategy.entry("Buy", strategy.long)  
        
        // Set exit conditions based on targets  
        strategy.exit("Take Profit 1", from_entry="Buy", limit=target1)  
        strategy.exit("Take Profit 2", from_entry="Buy", limit=target2)  
        strategy.exit("Stop Loss", from_entry="Buy", stop=stopLoss)  

// Sell signal condition: Wait for a bearish candle near the upper band  
bearishCandle = close < open and high > upperBand // A bearish candle should be formed near the upper band  
sellSignalCondition = bearishCandle  

if (sellSignalCondition)  
    previousRedCandleLow := low[1] // Capture the low of the current bearish candle  

    // Sell entry condition: next candle breaks the low of the previous bearish candle  
    sellEntryCondition = not na(previousRedCandleLow) and close < previousRedCandleLow  

    if (sellEntryCondition)  
        // Set stop loss above the previous bearish candle  
        stopLossSell = previousRedCandleLow + (high[1] - previousRedCandleLow) // Set stop loss above the bearish candle  
        targetSell = lowerBand // Target for sell is at the lower band  

        // Ensure we only enter the trade near the upper band  
        if (close > upperBand)  
            strategy.entry("Sell", strategy.short)  
            
            // Set exit conditions for sell  
            strategy.exit("Take Profit Sell", from_entry="Sell", limit=targetSell)  
            strategy.exit("Stop Loss Sell", from_entry="Sell", stop=stopLossSell)  

// Reset previous values when a trade occurs  
if (strategy.position_size > 0)  
    previousGreenCandleHigh := na  
    previousGreenCandleLow := na  
    previousRedCandleLow := na