Cointegrated Volume Structure Alpha (CVSA)
Family: hybrid · Regime: trending · Complexity: high · Asset classes: Equities, ETFs, Large-cap Stocks · Timeframes: H1, H4
Thesis
Alpha is most reliably extracted from assets that maintain a stable statistical relationship (cointegration) with a benchmark like SPY. Such assets represent the 'systemic core' of the market. When these assets reject high-volume structural levels (support/resistance) in alignment with smoothed momentum (Trendilo), the move reflects a genuine liquidity-driven shift rather than idiosyncratic noise. The Cointegration filter serves as a quality-control mechanism to ensure the price action is fundamentally linked to broader market flows.
Components
- Bollinger Bands (regime) — Defines the volatility regime; trades are only taken when price is in the outer 1-standard deviation zone to ensure sufficient expansion.
- Trendilo MT5 (direction) — Identifies the direction of smoothed momentum using ALMA to filter out noise while maintaining responsive directionality.
- Volumatic Support/Resistance Levels [BigBeluga] (entry) — Triggers entries on rejection of high-volume price levels where institutional liquidity is concentrated.
- Bears Power (exit) — Signals the exhaustion of buying pressure (for longs) or return of buying pressure (for shorts) via the relationship between daily lows and the EMA.
- TMA Risk Panel (risk) — Calculates dynamic lot sizing based on ATR-derived stop losses and fixed equity risk.
- Cointegration (COINTEGRATION) (confirmation) — Filters for assets currently in a stable statistical relationship with the benchmark, reducing exposure to erratic idiosyncratic moves.
Known failure conditions
- Protracted periods where ADF Statistic > -1.95 (loss of cointegration with SPY).
- Volatility collapse where Bollinger Band Width narrows to historical 10th percentile.
- Systemic market correlations reaching 1.0, rendering the relative cointegration filter obsolete.
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