Frankenstein-Darvas Cycle Breakout

Family: hybrid · Regime: trending · Complexity: high · Asset classes: Equities, Forex, Indices · Timeframes: H1, H4

Thesis

The hypothesis is that trend-following breakouts are most reliable when they occur immediately following a momentum 'reset' (MACD cross at discount) within a verified structural linear regression trend. By using Darvas Boxes to define the range and DPO to ensure cycle alignment, the strategy avoids entering during exhausted trends, while the Chandelier Exit (HA) provides a noise-filtered, volatility-sensitive exit mechanism. We expect an edge by entering only when trend, momentum, and market structure align simultaneously.

Components

• Detrended Price Oscillator (DPO) (regime) — Used to ensure the short-term cycle is not overextended in the direction of the trend, preventing buying at cyclical peaks.
• Frankenstein Ultimate Pro - ATM Logic (direction) — Establishes the primary trend bias via LSMA and filters for sufficient volatility to sustain a breakout.
• Darvas Boxes (Multi-Mode) (entry) — Provides the structural breakout trigger from consolidation ranges formed within the primary trend.
• QQE (Qualitative Quantitative Estimation) (exit) — Identifies momentum exhaustion via smoothed RSI/ATR trailing bands to exit before price hits the hard stop.
• Chandelier Exit (Heiken Ashi) (risk) — Calculates volatility-adjusted stop-loss levels and provides dynamic trailing based on Heiken Ashi smoothed price action.
• MACD signal turn (confirmation) — Acts as a momentum-reset filter, ensuring entries occur as momentum recovers from a 'discount' (pullback) level.

Known failure conditions

• The strategy fails if the Chandelier Exit Mult (0.75) is too tight for the underlying asset volatility, resulting in a win rate below 30%.
• Invalidated if Darvas Boxes fail to form during trending periods, suggesting the market is moving parabolically without consolidation.
• Failure if DPO and LSMA provide contradictory signals for more than 50% of the backtest period (regime conflict).

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