Hann-Filtered Zero Lag Trend Resumption

Family: trend_following · Regime: trending · Complexity: medium · Asset classes: FX Majors, Liquid Indices (SPX500, NAS100), Large Cap Equities · Timeframes: H1, H4, D1

Thesis

This strategy hypothesizes that market trends are best captured by filtering 'high-frequency' noise through FIR filters (DMH) while using zero-lag regression (ZLSMA) to maintain sensitivity. By entering when local momentum (Stochastic) temporarily opposes the major trend, we gain a favorable risk-reward entry before the trend resumes. The CCI acts as a statistical exhaustion filter to capture the bulk of the impulse wave.

Components

• Ehlers Directional Movement with Hann (DMH) (regime) — Acts as the primary trend filter; the Hann window FIR filter reduces the 'spectral leakage' of standard DM, ensuring we only trade when a statistically significant directional bias is established.
• Zero Lag Least Squares Moving Average (ZLSMA) (direction) — Provides a high-sensitivity trend direction confirmation. By using Heiken Ashi inputs, it filters out minor price gaps while maintaining the zero-lag response needed to confirm the DMH regime.
• Stochastic Oscillator (ta.stoch) (entry) — Used to identify local momentum exhaustion (pullbacks) within the higher-order trend. Entering when the %K is oversold/overbought against the trend minimizes entry risk.
• Commodity Channel Index (CCI) (exit) — Exits positions when the price deviates significantly from its mean (exhaustion) or when the momentum mean-reverts through the zero line.
• iExposure Utility (risk) — Used to manage aggregate risk. It monitors the 'NetLots' and 'AvgPrice' to ensure that the strategy does not exceed maximum allowable drawdown per symbol.

Known failure conditions

• DMH remains near zero for extended periods (low volatility regime) resulting in signal decay.
• Price exhibits 'sawtooth' patterns where Stochastic signals occur but ZLSMA and DMH fail to align, indicating a non-trending range.
• NetLots exposure exceeds account margin requirements due to multiple failed entry attempts.

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