Cointegrated Chan Lun Structural Trend Strategy

Family: hybrid · Regime: trending · Complexity: high · Asset classes: Equities, ETFs · Timeframes: H1, D1

Thesis

Trading assets that are statistically cointegrated with a benchmark (SPY) reduces idiosyncratic risk, as the asset's price is structurally 'tethered.' By applying Chan Lun's recursive structure within these cointegrated trends, one can enter at points of maximum exhaustion (pullbacks) while using the VIX term structure as a proxy for systemic risk to dynamically adjust position sizing. The edge lies in the combination of statistical stability (Cointegration) and structural precision (Chan Lun).

Components

• Cointegration (COINTEGRATION) (regime) — Filters for assets that maintain a statistically stable relationship with the broader market (SPY), ensuring that the trend being traded is grounded in a structural mean-reverting relationship rather than idiosyncratic noise.
• Linear Regression (LINREG) (direction) — Identifies the primary directional bias through the slope of the least-squares fit line.
• Chan Lun Engine (MT4 DLL version) (entry) — Provides the precise execution trigger based on recursive market structure (Strokes and Hubs), specifically identifying '2nd' and '3rd' type entry points which represent pullbacks in established trends.
• GoldenChart MACD (exit) — Used to detect momentum exhaustion via the histogram crossover for timely exits before trend reversal.
• VIX Curve Regime (Simple) (risk) — Scales risk and position size based on the volatility term structure; backwardation (Ratio > 1) mandates defensive sizing.
• Moving Averages (Multi-Method) (confirmation) — Acts as a final trend-alignment filter to ensure price is on the correct side of short-term momentum.
• Daily High Low MTF (volatility_filter) — Prevents entry at the extreme daily price boundaries to avoid buying 'tops' or selling 'bottoms' of the intraday range.

Known failure conditions

• Cointegration ADF statistic stays above -3.4 for more than 5 consecutive days, indicating a structural decoupling from the benchmark.
• The VIX ratio remains in persistent backwardation (> 1.0) while the asset price declines, suggesting a systemic liquidity crisis.
• Linear Regression slope and Moving Average direction provide conflicting signals for more than 3 bars.

Explore the full interactive blueprint, parameter ranges and evidence on WOBR StrategyVerse, or generate this strategy as an MT4/MT5 Expert Advisor with QuantMogul AI Engine.