VWAP Displacement Index (VDI)

VWAP Displacement Index (VDI)

Measures how far price is from VWAP, normalized by short-term volatility

🧠 FORMULA

VDI = (Price − VWAP) ÷ ATR(5m)

• Uses 5-minute ATR
• Gives you standardized distance from value (VWAP)

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📊 HOW TO INTERPRET VDI FOR ES

VDI	Interpretation	Implication
-0.40 to +0.40	At value (VWAP zone)	❌ Chop / rotation
±0.40 – ±0.80	Mild displacement	⚠️ Weak directional bias
±0.80 – ±1.20	Strong displacement	✅ Tradable trend
±1.20 – ±1.60	Extended trend	🔥 Momentum continuation
> ±1.60	Extreme displacement	⚠️ Exhaustion risk

🧠 HOW VDI HELPS YOU ‘LOOK UNDER THE HOOD’

• ES lives around VWAP
• Moves away → either:
  • trend continuation
  • OR mean reversion

VDI tells our members which phase ES is in right now

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🔥 GOOD VDI FOR ES (TREND)

✅ Strong trend behavior

• VDI builds gradually:
  0.4 → 0.8 → 1.1
• Holds above 0.80 for multiple candles
• Does NOT snap back to VWAP

👉 This is sustained institutional pressure

❌ WEAK VDI FOR ES (TRAP)

🚩 Mean-reversion trap

• VDI spikes quickly (0 → 1.2 in 1 candle)
• Then collapses back below 0.5
• VWAP gets touched within 1–2 candles

👉 This is liquidity grab, not trend

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🛡️ ES TRADE FILTERS - USING VDI

✅ TRADE ALLOWED ONLY IF:

|VDI| ≥ 0.80

AND

VDI sustained ≥ 0.80 for at least 3 consecutive 5m candles

👉 Persistence > magnitude for ES

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🔥 HIGH-CONFIDENCE ZONE:

VDI between 1.00 and 1.40

AND

stable (not dropping)

This is where:

• Trend legs extend
• Pullbacks are shallow

⚠️ CAUTION ZONE:

VDI > 1.60

→ Move is stretched
→ Only trade continuation if:

• RVF ≥ 1.20
• MA still increasing

Otherwise:
→ Expect reversal

❌ NO TRADE ZONE:

|VDI| < 0.40

• Price hugging VWAP
• No directional edge
• Chop guaranteed

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🔁 ENVIRONMENT DETECTION (TREND vs TRANSITION vs CHOP) WITH VDI + RVF COMBINATION (BIG EDGE FOR SPX DIRECTION MEMBERS)

🔥 BEST SETUPS (A+)

VDI ≥ 0.80 sustained

AND

RVF ≥ 1.10

→ Real move
→ Trend continuation

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❌ FAKE MOVE

VDI ≥ 0.80

BUT

RVF < 1.05

→ Looks like breakout
→ Actually weak participation

👉 Skip

 

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🧠 TREND DAY SIGNAL

VDI ≥ 1.00 sustained

AND

RVF ≥ 1.20 AND rising

→ Under these conditions, ES tends to ‘run’

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⚡ EXECUTION RULES (BUY / SELL SIGNALS)

LONG

• VDI ≥ +0.80 sustained
• Price above VWAP
• Enter on pullback → continuation

SHORT

• VDI ≤ -0.80 sustained
• Price below VWAP

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🧠 RVF, VDI & MA GIVE YOU A MORE COMPLETE PICTURE 

• RVF = participation
• VDI = distance from value
• MA = acceleration

Don’t trade ES unless price is clearly away from VWAP AND staying there