Alpha-Momentum Inside Bar Breakout Strategy
Family: trend_following · Regime: trending · Complexity: medium · Asset classes: Equities, Crypto, Forex Major Crosses · Timeframes: H1, D1
Thesis
The hypothesis is that assets exhibiting Relative Strength (outperforming a benchmark) are the first to resume trending moves after a volatility contraction (Inside Bar). By filtering for high ADX strength and using Parabolic SAR for immediate direction, we enter market-leading trends at 'springboard' points while using adaptive bands to capture volatility-adjusted profits.
Components
- Average Directional Index (regime) — Filters for high-momentum environments to avoid the 'whipsaw' characteristic of Parabolic SAR.
- Parabolic SAR (Standard) (direction) — Defines the local trend direction and ensures the entry is aligned with immediate price acceleration.
- Relative Strength Line [WavesUnchained] (entry) — Identifies assets outperforming the broader market (alpha generation) and ensures price is above its internal trend filter.
- Jurik Adaptive Envelope Bands (exit) — Provides a dynamic, volatility-adjusted profit target that expands and contracts based on Jurik's adaptive smoothing.
- Price Line and Visible Range High-Low (risk) — Determines structural stop-loss levels based on the lowest or highest price visible on the current chart window.
- Inside Bars (MTF Framework) (confirmation) — Provides a volatility contraction trigger; the breakout of an inside bar within a strong trend often signals trend continuation.
Known failure conditions
- ADX falls below 20 for sustained periods, indicating a regime shift to mean-reversion.
- Selected benchmark (e.g., SPY) becomes highly correlated with the asset, neutralizing the Relative Strength advantage.
- Visible Range High/Low levels are too wide (e.g., >10% of price), making position sizing negligible.
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