Adaptive Homodyne Relative Strength Strategy
Family: hybrid · Regime: trending · Complexity: high · Asset classes: Forex (Major Pairs) · Timeframes: H1, H4
Thesis
Sustainable FX trends emerge when there is a significant divergence in the relative strength of two major currencies, confirmed by volume and timed via the market's dominant cycle. By adjusting risk according to implied volatility (EVZ), the strategy captures the 'meat' of the move while protecting capital during periods of expected market stress.
Components
- Forex True Strength Index (FXTSI) (regime) — Filters the universe to pairs exhibiting a clear divergence in relative currency strength, ensuring the strategy operates in a high-probability macro regime.
- EMA with Switch-Based Length Reassignment (direction) — Provides a high-sensitivity trend baseline. Although the switch logic is currently dormant, it serves as the final directional gate.
- Smoothed Adaptive Momentum (entry) — Identifies entry points by adapting to the market's dominant cycle via the Homodyne Discriminator, reducing noise from fixed-period oscillators.
- Zero Lag Least Squares Moving Average (ZLSMA) (exit) — Acts as a low-latency trailing stop and exit trigger, sensitive to price curvature changes before they manifest in standard moving averages.
- Euro FX VIX (EVZ) Data Loader (risk) — Uses implied volatility to scale position risk and set stop distances, acknowledging that historical volatility often lags market expectations.
- Volume Accumulation (VA) (confirmation) — Confirms that the momentum detected by SAM is supported by price-volume conviction, filtering out low-liquidity spikes.
Known failure conditions
- EVZ data feed becomes disconnected or stale, leading to incorrect risk sizing.
- Prolonged periods of low volatility where FXTSI rankings fluctuate rapidly (churn).
- Dominant cycle period exceeds the SAM lookback buffer, causing 'cycle smearing' and late entries.
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