research
IBVWAP · Session-Based Momentum System
working paper · rev 2.4
IBVWAP — Initial Balance / VWAP
Session-Based Momentum System
NQ · MNQ · MES · ES · April 2026 · Live research terminal
Brisbane, AU · UTC+10 (AEST)
LIVE · PUBLIC DATA
AbstractThis system exploits predictable liquidity asymmetries between the Asian, London, and New York equity futures sessions. The Initial Balance — the price range formed during Asian hours — functions as a consensus zone reflecting Asia-Pacific risk appetite before Western institutional flow arrives. VWAP serves as the dynamic equilibrium anchor. A directional trade is triggered when price breaks the IB boundary and subsequently reclaims VWAP, confirming institutional absorption and signalling continuation. Risk is fully parametric: stop at 0.8× IB range from entry, target at 1.7× IB range — theoretical R:R of 2.13 : 1.
The performance data on this terminal is a rolling live trade log — every entry, exit, and R-multiple recorded here is from real-time execution by a fully automated algorithmic trading system, live since inception. There is no backtesting, no curve-fitting, no simulated fills. The equity curve, drawdown profile, and expectancy figures represent the strategy's actual out-of-sample performance as it compounds in production.
§ I
Market Microstructure Rationale
Kyle's (1985) model of informed trading predicts that price impact varies with the ratio of informed to uninformed order flow. During the Asian session, NQ trades in a compressed range as uninformed retail and momentum flow dominates — institutional desks are largely inactive. This structurally suppresses price discovery, producing a well-defined Initial Balance whose boundaries represent the market's fair value consensus absent directional institutional pressure.
Lo's Adaptive Market Hypothesis (2004) provides the broader framework: the edge here is not an arbitrage but a structural regime transition — as London and New York desks come online, order-flow composition shifts discontinuously. The VWAP reclaim filter identifies trades where institutional absorption is confirmed, consistent with momentum factor persistence documented across equity futures (Asness et al., 2013). Asia's historically strong gold bid — PBoC added ~$48B in reserves 2023–2026, driving SGE premiums of 15–40 USD/oz — co-occurs with NQ consolidation, providing a structural demand floor that amplifies this regime transition.
Fig. 1Representative IBVWAP Long Setup — NQ (5-min bars, illustrative)
VWAP IB range
① IB Build
10:00–17:00 AEST. Asia forms the range. High = 137, Low = 126, Range = 11 pts. VWAP anchors at 130.
② Breakout
London open. First close above IB high 137. Directional bias set: LONG. Volume expands.
③ VWAP Reclaim
Pullback to VWAP ~134. Brief dip below, then close above. Institutional absorption confirmed.
④ Entry & Target
Long @ 136. SL = 127 (−8.8 pts). TP = 155 (+18.7 pts). R:R = 2.13.
§ II
Why It Works
Equity futures markets are not uniformly efficient across sessions. The Asian hours produce structurally thin, low-conviction order flow — retail participation dominates, institutional desks are largely offline, and price discovery is suppressed. The result is a well-defined range — the Initial Balance — that acts as a daily consensus anchor rather than a directional signal.
The edge arises at the session transition. When London and New York institutions enter, order-flow composition shifts discontinuously. If price breaks the IB boundary with conviction and then reclaims VWAP on the pullback, it signals that institutional absorption has absorbed the initial sellers — the directional move is being supported, not faded. This is the entry trigger.
Risk is parametric and self-scaling: the stop (0.8× IB range) sits below the session noise floor, and the target (1.7× IB range) represents a measured-move extension. Because both levels are expressed as multiples of the IB range, the system automatically widens in high-volatility regimes and tightens in low-volatility ones — no ATR tuning, no VIX lookups, no external normalisation that could introduce look-ahead bias. The theoretical R:R of 2.13 : 1 requires only a 32% win rate to be profitable.
§ III
About the Author
Michael Nguyen
B. Advanced Finance & Economics (Hons)
University of Queensland
GPA6.85 / 7.0ATAR99.75BasedBrisbane, AU
Systematic intraday trader focused on session-based momentum strategies in equity index futures. Designed and deployed the IBVWAP system as a fully automated algorithmic trading strategy, and built this terminal to track its live performance — equity curve, drawdown, R-multiple distributions, and directional edge decomposition across every trade since inception.
linkedin.com/in/michaelmnguyenUniversity of Queensland · 2024–2027
NOT A TRADE RECOMMENDATION. Past performance does not guarantee future results. This terminal presents live research data for informational purposes only. All R:R figures and performance metrics are historical and not indicative of future results. Futures trading involves substantial risk of loss.