Efficient GARCH Momentum Filter

Family: trend_following · Regime: trending · Complexity: high · Asset classes: FX Majors, Equity Indices, Large Cap Equities · Timeframes: H1, H4, D1

Thesis

Trends are most sustainable when price moves with 'ease'—defined as significant price displacement relative to volume—following a stabilization in conditional volatility. By filtering for low Volume-to-Absolute-Return ratios (VARR), we avoid 'high-effort' churning markets (exhaustion), while GARCH-based risk sizing protects capital during the volatility clusters that typically precede trend reversals.

Components

• RSIOMA (RSI of Moving Average) (regime) — Sets the primary trend regime; price must be trending above/below the 50-level to ensure we aren't trading in a low-momentum churn.
• Supported map history demonstration (direction) — Acts as a structural bias filter; entry price must exceed the previous bar's close plus the tracked map size (constant increment) to confirm immediate-term directionality.
• MACD (entry) — Provides the specific entry trigger via the MACD/Signal line crossover during aligned regime/direction phases.
• ATR SL Finder (exit) — Provides a volatility-adjusted hard stop based on recent price range.
• Conditional Volatility (CV) (risk) — Used to scale position size and dynamically adjust the SL multiplier; higher conditional volatility requires wider stops and smaller risk exposure.
• Ease of Movement (EOM) (confirmation) — Confirms that price is moving 'easily' (low resistance relative to volume) to filter out high-effort, low-reward breakouts.
• Volume to Absolute Return Ratio (volatility_filter) — Acts as a congestion filter; prevents entry when the volume spent per unit of price movement is excessively high, indicating exhaustion.

Known failure conditions

• VARR denominator approaches zero in sideways markets, producing erratic spikes that prevent entry.
• The GARCH(1,1) model fails to converge or provides unrealistically high volatility estimates during black swan events.
• RSIOMA's double-smoothing causes the strategy to enter trends only after 50% or more of the move is completed.

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