Dollar-Inverse Relative Strength Momentum (DIRSM)

Family: hybrid · Regime: trending · Complexity: medium · Asset classes: Equities, FX Majors, Gold · Timeframes: H4, D1

Thesis

Risk assets demonstrate superior alpha when two conditions align: the US Dollar is in a structural downtrend (increasing global liquidity) and the specific asset is outperforming the broad equity market (SPY). By filtering for absolute momentum and relative strength under a favorable USD macro regime, we capture high-probability trend extensions while using volatility-adjusted exits to protect capital.

Components

• USDX (US Dollar Index) Tracker (regime) — Acts as the macro regime filter; assets are traded long only when the USD is in a bearish crossover (regime of high global liquidity).
• Momentum (MOM) (direction) — Ensures that the asset has absolute price velocity in the direction of the trade, preventing entry into stagnant relative outperformers.
• Relative Strength Line [WavesUnchained] (entry) — Provides the core entry signal by identifying assets that are gaining momentum relative to the broader market index.
• SuperTrend (exit) — Functions as a volatility-adjusted trailing stop to lock in gains during trending moves.
• SuperTrend & Pivots (risk) — The Daily Pivots (S1/R1) provide structural price floors/ceilings for initial stop-loss placement.
• TMA Risk Panel (volatility_filter) — Dynamically calculates lot size based on the ATR-derived distance to the initial stop-loss.

Known failure conditions

• USDX becomes positively correlated with risk assets (e.g., during extreme stagflation).
• The selected benchmark (SPY) enters a secular bear market where 'relative strength' still results in absolute losses.
• Market volatility exceeds the ATR-based stop distance consistently (regime shift to high-vol).

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