Harmonic Wavelet Momentum Hybrid

Family: hybrid · Regime: trending · Complexity: high · Asset classes: Forex (Major Pairs), Indices (SPX, DAX) · Timeframes: 15m, 1h

Thesis

Market structures like harmonic patterns only carry predictive power when they align with 'efficient' price movement (Kaufman ER) and institutional commitment (RVOL). By using Wavelet Transform to strip away high-frequency noise and Session Ranges to anchor risk, we can isolate high-probability continuation moves that occur when noise is low and momentum is surging.

Components

• Custom Pattern Detection (regime) — Identifies the geometric market regime by spotting structural exhaustion or continuation patterns based on Fibonacci ratios.
• Discrete Wavelet Transform (DWT) (direction) — Uses Haar wavelet decomposition to filter out price noise and provide a denoised 'true' trend direction from the approximation coefficients.
• DEMA 200 & ADX Combined HUD (entry) — Ensures that the entry occurs during a period of strong, established momentum that has already crossed the DEMA mean.
• TopTrend (BBands Stop) (exit) — Acts as a dynamic volatility-adjusted trailing stop to capture extended trends while exiting on volatility expansion against the position.
• Session Range (High/Low/Mid) (risk) — Provides the structural 'anchor' for risk management, using intraday session extremes to define stop loss placement and trade validity.
• Relative Volume (RVOL) (confirmation) — Confirms the validity of the harmonic pattern breakout by ensuring institutional participation (volume) is higher than the historical average for that specific time.
• Efficiency Ratio (Kaufman) (volatility_filter) — Filters out choppy, inefficient price action where harmonic patterns often fail or lead to whipsaws.

Known failure conditions

• RVOL consistently stays below 1.0 during pattern completions, suggesting lack of institutional interest.
• Price remains trapped between the Session Midpoint and Session High/Low for >4 hours, indicating a 'dead' session.
• The DWT 'approximation' component shows frequent oscillations (aliasing), suggesting the decomposition level is inappropriate for current volatility.

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