ACF Volatility Anchor Breakout

Family: breakout · Regime: trending · Complexity: medium · Asset classes: Equities, Forex, Crypto · Timeframes: 1H, 4H, 1D

Thesis

Market trends are not random walks but exhibit 'memory' (autocorrelation). By identifying periods where price self-similarity is high (ACF) and the path is efficient (VHF), we can enter on volatility bursts (VR) that signal the start of a momentum leg, using a dynamic long-term anchor to ensure we are on the side of the macro trend.

Components

• Autocorrelation Function (ACF) (regime) — Determines if the current price series exhibits serial correlation (persistence) vs mean reversion. Only trades when ACF > 0 to ensure we are in a momentum regime.
• Unsupported UDF Switch Reassignment EMA (direction) — Acts as a 'Cumulative Anchor.' Since the length increases with the bar index, it creates an increasingly stable (and eventually sluggish) baseline that forces the strategy to only trade in the direction of the long-term established trend.
• Volatility Ratio (VR) (entry) — Acts as the execution trigger. We enter when volatility expands significantly relative to the ATR (VR > 1.5), signaling a breakout or momentum surge.
• McNicholl EMA (MCNMA) (exit) — Used for a zero-lag exit. Its triple-cascaded structure allows for tight trailing without the lag of a standard EMA, protecting gains when the volatility spike exhausts.
• Support and Resistance (Fractal-based) (risk) — Provides objective market structure points for hard stop-loss placement and risk-per-share calculations.
• RSI Area (Histogram) (confirmation) — Filters out low-momentum signals. Requires RSI to be above/below the 50 centerline to ensure the price movement has directional velocity.
• Vertical Horizontal Filter (VHF) (volatility_filter) — Filters out 'fake-outs' in sideways markets. Only permits trading when the vertical price movement exceeds the horizontal sum of noise, indicating a genuine trend phase.

Known failure conditions

• Price repeatedly hits fractal stops before MCNMA can signal an exit in high-volatility ranging markets.
• Market enters a 'drift' state where volatility (VR) is low but price moves significantly, resulting in no entries.
• UDF EMA length becomes so large that it effectively becomes a horizontal line, failing to react to multi-year trend changes.

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