ALMA-SMC Liquidity Mean Reversion
Family: hybrid · Regime: trending · Complexity: high · Asset classes: FX, Indices, Commodities · Timeframes: M15, H1
Thesis
Institutional price displacement creates 'Fair Value Gaps' (FVG) that act as magnets for price once a new structural trend (BOS) is established. By using the ALMA as a low-lag regime filter and the Daily VWAP as a volume-weighted equilibrium target, we can exploit the tendency of price to seek liquidity imbalances before returning to its intraday mean. The ATR Fib filter prevents 'chasing' trades when the session's volatility is already exhausted.
Components
- Arnaud Legoux Moving Average (ALMA) (regime) — Acts as the primary trend filter. Its Gaussian distribution provides a smoother signal than EMAs, reducing 'noise' exits while maintaining low lag for regime identification.
- SMC Visualizer (ICT Library) (direction) — Defines the directional bias through Market Structure. Entries are only valid if a recent Break of Structure (BOS) aligns with the ALMA trend.
- ICT + FVG + RSI V1.2.12 (entry) — Identifies specific entry triggers via Fair Value Gaps (FVG) which represent price imbalances where institutional orders are likely to be filled.
- Daily Volume-Weighted Average Price (VWAP) (exit) — Acts as the intraday mean. Since FVG entries often target liquidity, VWAP serves as a logical equilibrium point for taking profits.
- Auto Fibonacci (risk) — Dynamically maps the current structural leg to provide objective Stop Loss levels at the 100% retracement (swing point).
- ATR Fib (volatility_filter) — Ensures the trade is taken within a volatility expansion window. It prevents entries if price has already exceeded its projected ATR extension for the session.
Known failure conditions
- Market enters a 'choppy' sideways regime where ALMA remains flat and price oscillates around VWAP without structural breaks.
- Extreme news events (NFP, CPI) that cause price to gap through VWAP and FVG zones without retracement.
- Static ATR input in ATR Fib becomes decoupled from realized volatility (e.g., VIX spikes).
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