Why we anchor mean reversion to session VWAP, not yesterday's close
Session VWAP resets each day with fresh volume weighting. For intraday fades, yesterday's close often misleads about where "fair" price sits right now.
Retail traders often draw mean reversion levels from the prior session close or a static pivot formula. That works for swing trades held overnight. It breaks down when you are fading a stretch that happened in the first ninety minutes of today's session.
The problem with static anchors
Yesterday's close tells you where price settled after sixteen hours of negotiation. It does not tell you where today's participants have agreed to trade so far. On gap mornings — common in SET and US index markets — price may open far from yesterday's close and never return. Fading "back to close" in that context is a different trade than fading a deviation from today's volume-weighted average.
Session VWAP recalculates with each print, weighting price by volume. When we mark a +2 deviation band in the workshop, we mean two standard deviations from session VWAP at that moment, not from a line drawn at midnight.
When we still reference prior close
We use yesterday's close as context, not as the fade target. It belongs in a pre-market note: "Gap up 1.2% — close is below current price; reversion target may be VWAP first, close second." The sequence matters. Intraday, VWAP leads.
A simple pre-market check
Before the open, write three numbers on your grid paper: prior close, overnight high/low, and the first estimated VWAP touch you expect in the opening rotation. If price extends beyond your deviation band before VWAP has stabilized (usually after the first fifteen to thirty minutes in liquid markets), treat the fade as higher risk.
This is the first exercise in our flagship workshop. Participants often realise they had been mixing swing anchors with intraday entries — a fix that costs nothing but attention.