Cointegrated Savitzky-Buddha Flow
Family: hybrid · Regime: trending · Complexity: high · Asset classes: Equities, Futures · Timeframes: 15m, 1H
Thesis
This strategy hypothesizes that market inefficiencies are best captured when a statistical cointegration (relative value) is paired with a clear momentum signal. While cointegration identifies the 'anchor' of the pair, Savitzky-Golay and REI identify the timing of the impulse, and Buddha Money Flow confirms that 'smart money' is driving the move. The edge exists in filtering out noise that traditional moving averages fail to handle while ensuring the trade is grounded in a statistically stable relationship.
Components
- Cointegration (COINTEGRATION) (regime) — Establishes a statistical relationship between the primary asset and a benchmark. A low ADF statistic suggests a mean-reverting regime where deviations are likely to be corrected.
- Savitzky-Golay Filter (SGF) (direction) — Provides a low-lag, noise-reduced directional bias by fitting local polynomials to price action, identifying the 'true' short-term drift.
- Buddha Money Flow (entry) — Pinpoints institutional participation through cumulative volume delta. Entry requires aggressive volume imbalance in the direction of the SGF drift.
- SuperTrend (exit) — Acts as a volatility-adjusted trailing stop and secondary trend-flip exit if the mean reversion fails to materialize quickly.
- Murrey Math Line X (risk) — Provides discrete, non-subjective support/resistance levels based on price harmonics for stop-loss placement and position sizing.
- Range Expansion Index (REI) (confirmation) — Filters out non-trending noise. Entry is only permitted when momentum velocity is expanding, preventing entries in stagnant markets.
Known failure conditions
- Prolonged ADF statistic > -2.0, indicating the cointegration relationship has broken down (pair decoupling).
- High volatility environments where Murrey Math levels shift frequently, causing whipsaws in position sizing.
- Low liquidity periods where Money Flow Delta% becomes erratic or misleading.
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