Darvas-OB Adaptive Momentum Expansion
Family: breakout · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Crypto · Timeframes: H1, H4, D1
Thesis
The hypothesis is that sustainable market trends begin with a volatility-backed breakout from a Darvas consolidation zone, confirmed by institutional order flow (OrderBlocks). By requiring momentum confirmation (QQE) and volatility expansion (Bollinger Bands), we filter for 'smart money' participation. The use of a McGinley Dynamic exit acknowledges that trend speed is non-linear, providing a more robust trailing stop than standard fixed-period averages.
Components
- Darvas Boxes MetaTrader 5 (regime) — Defines the structural regime by identifying the most recent consolidation floor and ceiling. Breakouts from these levels indicate potential trend shifts.
- Qualitative Quantitative Estimation (QQE) (direction) — Acts as a secondary trend and momentum filter to ensure that structural breakouts are backed by relative strength momentum.
- OrderBlock FVG Detector (entry) — Provides the specific entry trigger by identifying institutional footprint (OB) or liquidity gaps (FVG) that occur immediately following a structural breakout.
- McGinley Dynamic (exit) — Provides an adaptive trailing exit that tracks the trend more closely than a standard EMA, minimizing give-back during volatility spikes.
- Average True Range (ATR) (risk) — Provides volatility-adjusted stop loss placement and dynamic position sizing.
- Bollinger Bands (volatility_filter) — Filters out entries during low-volatility 'squeezes' where Darvas breakouts are more likely to be false.
Known failure conditions
- Price frequently violates Darvas Box boundaries without generating QQE momentum, leading to 'death by a thousand cuts' in ranging markets.
- ATR contraction to historical lows makes stop-losses too tight to survive normal market noise.
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