Cyclical-Darvas Momentum Filter

Family: trend_following · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Gold · Timeframes: H1, H4

Thesis

Price trends are most sustainable when momentum breakouts (CCI) align with both a low-lag trend (SuperSmoother) and a specific cyclical frequency (BPF), provided the breakout originates from a confirmed structural consolidation (Darvas Box) and occurs outside the noise of weekend price gaps.

Components

• Bandpass Filter (BPF) (regime) — Acts as the regime filter to ensure the market is currently exhibiting cyclical momentum within a specific frequency band, avoiding 'dead' or chaotic price action.
• Ehlers SuperSmoother Filter (direction) — Provides a low-lag directional bias. It filters out high-frequency noise that the BPF might pass through, ensuring we only trade in the direction of the underlying 2nd-order trend.
• Commodity Channel Index (Rosasurfer Framework) (entry) — Used as the trigger mechanism. Entering on the +/- 100 level breakout captures the transition from mean-reversion to momentum expansion.
• HiLo Activator (Pandini Version) (exit) — Provides a dynamic trend-following exit that adapts to price volatility (using high/low averages) to lock in profits once the trend decelerates.
• Darvas Boxes Modern/Classic (risk) — Defines the structural 'floor' and 'ceiling' of the current consolidation. Used for setting hard stop-losses and determining position size based on the box height.
• Bears Power (confirmation) — Acts as a momentum confirmation. For longs, we ensure bears are losing strength (Bears Power rising); for shorts, we ensure bears are dominant (Bears Power < 0).
• Sunday Opening Gap (volatility_filter) — A volatility filter to prevent entering trades when an unfilled weekly gap exists, which often acts as a price magnet or indicates extreme liquidity gaps.

Known failure conditions

• The Bandpass Filter produces flat output (low amplitude) for extended periods, indicating a lack of tradeable cycles.
• CCI levels oscillate around the zero line without reaching +/- 100, resulting in high fees from lack of signal.
• Price remains trapped within a single Darvas Box for > 3x the average holding period, indicating total regime shift to ranging.

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