GARCH-SMC Structural Trend Follower

Family: hybrid · Regime: trending · Complexity: high · Asset classes: Forex, Major Indices, Crypto/BTC · Timeframes: H1, H4

Thesis

The strategy hypothesizes that market trends are most tradable when statistical volatility is clustering (per GARCH) and a structural 'Change of Character' (CHoCH) occurs. By requiring both a statistical regime filter and a structural break, the system seeks to avoid 'fakeout' breaks that occur during low-volatility or random noise periods. The edge lies in the confluence of GARCH-informed risk and SMC-informed entry.

Components

• Conditional Volatility (CV) (regime) — Filters for regimes where volatility is high enough to support trend-following but within statistical norms, avoiding 'dead' markets.
• Parabolic SAR (Standard) (direction) — Acts as a secondary trend filter to ensure the momentum is aligned with the structural break.
• TradeEase (entry) — Identifies specific entry triggers based on Change of Character (CHoCH) and Break of Structure (BOS).
• TopTrend (BBands Stop) (exit) — Provides a dynamic, volatility-adjusted trailing stop to capture maximum trend extension while protecting capital.
• ATR Heiken Ashi (risk) — Provides a smoothed volatility metric for calculating position size and initial stop loss distance.

Known failure conditions

• Prolonged periods of GARCH-estimated volatility below 10% (annualized) suggesting a compression regime.
• Frequent CHoCH signals without follow-through in the PSAR direction (indicative of a ranging market).
• GARCH volatility spikes above 50% (annualized) which typically precede exhaustion or unpredictable gaps.

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