Dynamic Cycle Breakout Strategy

Family: hybrid · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Commodities · Timeframes: H1, H4

Thesis

Market trends are most tradable when price momentum breaks out of the previous day's range (liquidity expansion) and aligns with a smoothed trend (McGinley), provided that the entry occurs at the start of a new cycle (STC) and exit occurs before cycle exhaustion (DSP). This avoids the 'lag' of traditional MAs while filtering for volatility.

Components

• McGinley Dynamic (regime) — Acts as the master trend filter; ensures we are only trading in the direction of the smoothed price speed.
• Momentum (Example) (direction) — Confirms that the price action is accelerating in the direction of the McGinley trend.
• Schaff Trend Cycle (STC) (entry) — Provides the precise cyclical entry trigger by identifying the transition from oversold/overbought within the trend.
• Ehlers Detrended Synthetic Price (DSP) (exit) — Detects cycle exhaustion; used to exit when the cyclical component of price peaks/troughs.
• SuperTrend MT5 (FxGeek) (risk) — Provides a volatility-adjusted trailing stop and initial stop loss based on ATR.
• Daily High Low MTF (volatility_filter) — Acts as a volatility/liquidity filter; entries are only valid if price has broken the previous day's range, ensuring sufficient expansion.

Known failure conditions

• Extended period of low realized volatility where price stays within the previous day's High-Low range.
• Frequent whipsaws where STC cycles back and forth while the McGinley Dynamic remains flat.
• Trend exhaustion where DSP triggers late, causing exits to occur at a loss despite the trade being briefly profitable.

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