Darvas-KNN Volatility Adjusted Breakout

Family: breakout · Regime: trending · Complexity: high · Asset classes: Equities, Crypto, Major FX Pairs · Timeframes: H1, H4, D1

Thesis

A breakout from price consolidation (Darvas Box) is only sustainable if confirmed by underlying accumulation (A/D) and a statistically significant volume-weighted trend (KNN SuperTrend). By weighting position size using the ratio of annualized returns to historical volatility (ROC/HV), the strategy selectively increases exposure during 'efficient' price movements and reduces it when volatility noise is high, thereby improving the Sharpe ratio over traditional breakout methods.

Components

• Darvas Boxes MetaTrader 5 (regime) — Defines the structural regime; entries only occur once price has broken out of a validated consolidation box.
• Average Force (direction) — Ensures momentum is aligned with the breakout direction by checking if the smoothed relative price position is above/below the midpoint.
• Volume SuperTrend AI (Expo) (entry) — The final trigger, using KNN-weighted volume-moving averages to confirm that the trend change is statistically similar to historical high-volume trend starts.
• Chandelier Exit (Heiken Ashi) (exit) — Provides a volatility-based trailing stop that reacts to Heiken Ashi price action, filtering out minor noise while protecting gains.
• Annualized ROC / HV Ratios (risk) — Provides the conviction score; if the rate of price change is low relative to historical volatility, position sizes are reduced to account for poor risk-adjusted momentum.
• Accumulation/Distribution (A/D) (confirmation) — Confirms that the price breakout is supported by positive money flow (rising A/D for longs) to filter out low-volume "trap" breakouts.

Known failure conditions

• A/D line stays flat or diverges negatively for more than 10 bars during a price breakout.
• HV (Historical Volatility) spikes 3x higher than the 20-day average, causing the ROC/HV ratio to collapse during a trend.
• Darvas Boxes frequently overlap, indicating a lack of clear market structure.

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