Causal HP-McNicholl Momentum Cluster
Family: trend_following · Regime: trending · Complexity: high · Asset classes: FX, Equities, Commodities · Timeframes: H1, H4
Thesis
The strategy assumes that institutional trend initiation is characterized by a synchronized rise in tick-volume (Force Index) and directional intensity (ADX) following a cyclical bottoming (HP Cycle). By using a zero-lag McNicholl EMA, we can enter these moves before standard moving average crossovers, while using daily structural levels (DHL) to define the failure point of the trend. The edge lies in the reduction of signal lag relative to the volume-weighted confirmation.
Components
- Hodrick-Prescott Filter (HP) (regime) — Defines the macro-regime; entries only permitted when the cyclical component (HP_cycle) has bottomed and turned positive for longs, or peaked and turned negative for shorts.
- ADX / Connectable [Azullian] (direction) — Ensures trades are only taken in periods of expanding trend strength (ADX rising) and correct directional bias (DI+ vs DI-).
- McNicholl EMA (MCNMA) (entry) — Provides the high-sensitivity trigger. The zero-lag nature of the 6-stage EMA cascaded TEMA allows for capture of momentum shifts earlier than standard EMAs.
- Commodity Channel Index (CCI) (exit) — Acts as an exhaustion exit when price becomes significantly overextended relative to its mean.
- Daily High Low MTF (risk) — Used for structural stop-loss placement and position sizing based on the previous day's volatility range.
- Force Index (NNFX Variant) (confirmation) — Confirms that price movement is supported by volume/tick activity, filtering out low-liquidity spikes.
Known failure conditions
- Prolonged flat-line price action where ADX remains below 20 for >50 bars.
- High-frequency volatility spikes that trigger the MCNMA 'overshoot' weakness, causing repeated stop-outs at Daily High/Lows.
- Breakdown of the correlation between price change and tick volume (Force Index failure).
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