VWAP + EMA(11) on NIFTY futures: no intraday edge on any timeframe, and costs that dwarf the one overnight
In short The two-line VWAP + EMA(11) rule had no edge before costs on 1- to 30-minute candles over four years of NIFTY futures, and after a realistic 13.7 points per round trip it lost on every timeframe. Holding positions overnight on 15-minute candles found a real but small edge, about 4.5 points a trade, still far below the cost of trading it.
The idea
Two lines on an intraday chart: VWAP, the day’s volume-weighted average price, and EMA(11), a fast moving average of the last eleven candles. A rule circulating among traders on social media combines them: when the fast average is above VWAP the day is “bullish”, so go long as soon as a candle closes above the average, and step aside when a candle closes back below it. The mirror image goes short. To avoid giving back a good day, stop trading after the first winning trade.
It is a simple trend-following rule with a quick exit, and it is easy to automate. We tested it on NIFTY futures.
The rules
- Lines: VWAP, reset each morning; EMA(11) of the candle closes, carried from day to day.
- Long: EMA above VWAP and a candle closes above the EMA. Enter at the next candle’s open.
- Short: EMA below VWAP and a candle closes below the EMA.
- Exit: a candle closes back across the EMA. Exit at the next candle’s open.
- First win, then done: after the first trade of the day that makes money after costs, no new trades that day.
- Intraday: signals from candles closing at 9:20 am to 3:00 pm; anything still open is closed at 3:15 pm.
- Cost: built up from the published charge schedule for NIFTY futures: ₹20 brokerage per order (at ten lots per order), STT of 0.05% on the sell side, exchange charges of 0.00173% on both sides, SEBI fee, stamp duty of 0.002% on the buy side and GST, plus 0.5 point of slippage on each side. That comes to about 13.7 points per round trip at the test’s average NIFTY level of about 22,500: STT 11.3, exchange charges 0.8, stamp duty 0.5, GST, SEBI fee and brokerage 0.3, slippage 1.0. Today’s charge rates are applied to the whole history.
The backtest
Data: 1-minute prices of the front-month NIFTY futures contract, 15 September 2022 to 11 August 2026 (3.9 years, 963 sessions), joined across expiries so the EMA doesn’t jump at each roll. All figures are per lot in NIFTY points (one lot = 65 units, today’s lot size, applied throughout).
The headline is the rule as circulated, on 5-minute candles:
| Trades | Per day | Avg / trade | Win % | Total | t | |
|---|---|---|---|---|---|---|
| Before costs | 3,090 | 3.2 | −1.4 pts | 30% | −4,450 pts | −2.02 |
| After costs | 4,414 | 4.6 | −14.2 pts | 18% | −62,661 pts | −25.2 |
(t measures whether the average trade is distinguishable from zero; around 2 or more is needed before we call a result more than luck. A large negative t means a reliable loss.)
The two runs have different trade counts because of the first-win rule: before costs, about 30% of trades win, so the day often stops early. After costs only 18% win, so the rule keeps trading.
Before costs it loses. On 5-minute candles the rule lost about 1.4 points a trade before any charges: its few large wins did not make up for the many small losses as price crossed back over the EMA. Longs and shorts both lost. After costs the loss was about 16,000 points a year per lot (roughly ₹10 lakh), in every year of the test:
| Year | Trades | Before costs | After costs |
|---|---|---|---|
| 2022* | 291 | +701 | −2,574 |
| 2023 | 1,172 | −1,471 | −15,318 |
| 2024 | 1,064 | +662 | −14,611 |
| 2025 | 1,155 | −1,067 | −18,367 |
| 2026* | 732 | −926 | −11,791 |
*From 15 September 2022; 2026 up to 11 August. Points per lot; both columns are for the trades taken under the after-costs rule.
Every candle size
Perhaps 5 minutes is the wrong chart. The same rule on six candle sizes, before and after costs:
| Candle | Trades / day | Avg before costs | t | Avg after costs | Total after costs | t |
|---|---|---|---|---|---|---|
| 1-min | 2.9 | +0.4 | 0.88 | −13.4 | −111,142 | −70.7 |
| 3-min | 3.0 | −0.1 | −0.22 | −13.8 | −76,223 | −35.9 |
| 5-min | 3.2 | −1.4 | −2.02 | −14.2 | −62,661 | −25.2 |
| 10-min | 2.7 | +0.3 | 0.32 | −13.2 | −39,841 | −13.8 |
| 15-min | 2.2 | +2.2 | 1.65 | −11.7 | −26,364 | −9.5 |
| 30-min | 1.2 | +1.1 | 0.56 | −12.5 | −14,445 | −6.6 |
Trades per day and averages before costs are from the before-costs runs; points per lot.
No candle size has an edge before costs: the best, 15-minute candles, made about 2 points a trade with a t of 1.65, short of our bar. After costs every one lost heavily. Slower charts lose less only because they trade less.
The one place an edge appears: holding overnight
On 15-minute candles we also dropped the 3:15 pm exit, so a position is held overnight until a candle closes back across the EMA, which can be the next morning. This is not the rule as circulated, but it is where the only measurable edge appeared. Here every trade of the day counts (no first-win stop), as in the original four-year test of this variant.
| 15-min, held overnight | Trades | Avg / trade | Win % | Total | t |
|---|---|---|---|---|---|
| Before costs | 2,314 | +4.5 pts | 29% | +10,304 pts | 2.19 |
| After costs | 2,314 | −9.4 pts | 23% | −21,659 pts | −4.62 |
About a quarter of trades were held overnight; 29 were held across an expiry and paid for a roll (one extra round trip). With the first-win stop, the result before costs was similar (+5.5 points a trade, t 2.36, 1,563 trades).
Before costs this version made money in every calendar year, with the bigger share in the second half of the test (t 0.99 in the first half, 2.01 in the second). Wins were rare but large: +96 points against −33 for an average loss. Letting a winning trade run past the close is what made the difference.
But the edge is about 4.5 points a trade, and a futures round trip costs about 13.7. Costs are three times the edge. Charges alone, with no slippage at all, are about 12.8 points. Even with STT at 0.02% instead of 0.05%, a round trip would still cost about 7 points.
Robustness tests
For the headline (5-min, intraday):
| Test | Trades | Total | t |
|---|---|---|---|
| Before costs | 3,090 | −4,450 | −2.02 |
| As tested | 4,414 | −62,661 | −25.2 |
| Slippage 1 pt per side | 4,477 | −67,555 | −26.9 |
| Double cost | 4,414 | −123,220 | −49.4 |
| No first-win stop, before costs | 6,937 | +943 | 0.31 |
| No first-win stop, after costs | 6,937 | −94,205 | −31.0 |
| First half, Sep 2022 – Aug 2024 | — | −27,398 | — |
| Second half, Aug 2024 – Aug 2026 | — | −35,263 | — |
- Nothing nearby works. 3- and 10-minute candles lost as heavily; dropping the first-win rule made no difference before costs (+0.1 points a trade) and lost more after them.
- Every period lost. Both halves, every year and 16 of 17 quarters lost money after costs.
- Enough data, at least: 4,414 trades over 3.9 years, so the verdict is not a small-sample accident.
Risks
- Costs. At 13.7 points a round trip and several trades a day, costs alone run to roughly ₹10 lakh a year per lot at this trading rate.
- Whipsaws. On choppy days price crosses the EMA again and again; each crossing is a round trip.
- The first-win rule keeps losers trading. It stops the day after a win, not after a string of losses.
- Leverage and gaps (overnight version). Futures need margin, and a position held overnight can gap against you with no chance to exit.
- Fills. Entries and exits are at the next candle’s open after a signal; real fills on fast moves can be worse.
Pros & cons
Pros
- Simple, fully mechanical and easy to automate.
- Long and short, with a quick exit on every trade.
- Held overnight on 15-minute candles it has a small edge before costs (t 2.19).
Cons
- No edge before costs on any candle size from 1 to 30 minutes.
- Loses heavily after costs on every candle size, in every year.
- The overnight edge is about a third of what a futures round trip costs.
- Trades several times a day, so costs compound quickly.
Our verdict
It passed one of our eight checks, enough data, and that only confirms the result. The rule as circulated, on 5-minute candles, lost slightly even before costs, and after a realistic 13.7 points per round trip it lost about 14 points on every trade, in every year and on every candle size we tried.
The one interesting finding is the overnight version on 15-minute candles: letting winners run past the close turned a no-edge rule into a small real one, about 4.5 points a trade. That is not nearly enough. On NIFTY futures, at today’s charges, a round trip costs about three times that edge. This is a test of past data, not a forecast.
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Hypothetical, backtested results on historical data at least three months old. They include modelled costs but can't capture every real-world effect, and past performance does not predict future results. This is educational research, not a recommendation. Full disclaimer.