GARCH-Fractal Momentum Convergence Strategy

Family: trend_following · Regime: trending · Complexity: medium · Asset classes: Forex, Indices, Crypto · Timeframes: M5, M15, H1

Thesis

Sustainable trends occur when the market transitions from a low-volatility state into an organized directional state (volatility clustering). By using GARCH(1,1) to identify this transition and Fractal Chaos Bands to ensure 'order' (breakout), we can capture momentum moves via QQE while using a T3-smoothed TTF to filter out minor pullbacks. The edge exists in the convergence of statistical volatility risk (GARCH) and structural price breakout.

Components

• Conditional Volatility (CV) (regime) — Identifies periods of 'volatility clustering' where risk is high enough to provide movement but not yet at 'chaos' levels that invalidate trends.
• Trend Trigger Factor (TTF) with T3 Smoothing (direction) — Measures the intensity of the trend by comparing the recent range to the older range; T3 smoothing reduces the noise inherent in range-based calculations.
• QQE (Qualitative Quantitative Estimation) (entry) — Provides the final execution trigger when the smoothed RSI momentum crosses its trailing volatility band, ensuring momentum is accelerating in the direction of the TTF bias.
• SuperTrend (exit) — Provides a dynamic trailing stop that accounts for ATR-based volatility, protecting capital against trend reversals.
• Legacy Trading Connector (OptionX) (risk) — Manages the execution risk and timing; specifically handles the signal capture and ensures trade entry only occurs when payout/liquidity filters are met.
• Fractal Chaos Bands (FCB) (volatility_filter) — Acts as a breakout filter; ensures the trade is entering a period of directional 'order' rather than 'chaos' by requiring price to be outside the fractal bands.

Known failure conditions

• Price remains inside the Fractal Chaos Bands for >50% of the lookback period, indicating a high-entropy sideways market.
• Conditional Volatility (CV) exceeds 50% (annualized), suggesting extreme panic where technical indicators lose predictive power.
• SuperTrend flip occurs within 3 bars of entry, indicating lack of trend follow-through.

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