Autocorrelated Spectral Breakout System

Family: breakout · Regime: trending · Complexity: high · Asset classes: FX, Equities, Crypto · Timeframes: H1, H4, D1

Thesis

Market regimes typically evolve from cyclical patterns to directional trends. By identifying a high-power cyclical state via the Ehlers ACP, we identify an 'energy-loaded' market. A subsequent breakout (TBO) that is validated by price efficiency (ER) indicates the start of a trend. The Jarque-Bera test provides a unique edge by quantifying the 'unpredictability' (non-normality) of the price movement, allowing for tighter risk management during fat-tail events where standard technical analysis often fails.

Components

• Ehlers Autocorrelation Periodogram (ACP) (regime) — Used as the primary regime filter to identify periods of high cyclical energy (Normalized Power > 0.8), suggesting a coiled spring effect before a breakout.
• TradeBreakOut (TBO) (direction) — Provides the directional bias. A breakout from recent 50-period highs/lows confirms the transition from a cyclical regime to a trending one.
• Stochastic Oscillator (entry) — Acts as a tactical timing trigger. It captures momentum pullbacks or continuations immediately following the breakout signal.
• MACD Classic (3-Line) (exit) — Provides a trend-following exit mechanism. The trade is closed when the MACD signal line crosses, indicating the momentum of the breakout is exhausting.
• Jarque-Bera Test (JB) (risk) — Used to adjust risk. High JB values indicate non-normal price distributions (fat tails). Position sizes are reduced when JB is high to account for unpredictable tail risk.
• Efficiency Ratio (Kaufman) (volatility_filter) — Filters out 'noisy' breakouts. Only entries with high price displacement relative to noise are considered, ensuring the move has sufficient 'efficiency'.

Known failure conditions

• Market remains in a permanent low-power state (ACP < 0.5) for extended periods, preventing any signals.
• Breakouts (TBO) consistently occur during low Efficiency Ratio periods, indicating a high-noise environment.
• The Jarque-Bera test remains at extreme levels (>20) continuously, suggesting the underlying distribution has shifted away from the model's assumptions.

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