Idiosyncratic Wave Breakout (IWB) Strategy

Family: breakout · Regime: trending · Complexity: high · Asset classes: Equities, FX Majors, Crypto · Timeframes: H1, D1

Thesis

True idiosyncratic breakouts occur when an asset's price action becomes non-random (RWI > 1) and its statistical link to the broader market weakens (ADF > -2.5). By entering these breakouts at previous-day liquidity levels and using Elliott Wave pivots for risk, we capture the 'motive' phase of a trend while filtering out noise and market-wide beta movements.

Components

• Indicator Sample (Template) (regime) — Serves as a data-integrity 'heartbeat' ensuring sufficient historical bar count is available before initializing complex statistical calculations.
• MACD Demo Implementation (direction) — Provides the primary trend bias; long entries are only permitted when momentum is positive (MACD > Signal).
• Daily High Low MTF (entry) — Identifies key liquidity levels from the previous day; the breakout of these levels triggers the execution.
• Donchian Channels (DC) (exit) — Acts as a trailing volatility exit; long positions close when price touches the lower channel (20-period low).
• Elliott Wave [LuxAlgo] (risk) — Used for structural risk management; the stop loss is placed at the most recent motive wave pivot (Wave 2 or 4) to ensure the trend structure is intact.
• Cointegration (COINTEGRATION) (confirmation) — Filters for idiosyncratic strength; entries occur only when the asset is NOT cointegrated with the benchmark (ADF > -2.5), suggesting a unique breakout rather than a mean-reverting index move.
• Random Walk Index (RWI BTF) (volatility_filter) — Ensures the price action is exhibiting non-random trending behavior (RWI > 1.0) rather than noise.

Known failure conditions

• Extended periods of high cointegration (ADF < -3.4) with the benchmark, preventing any idiosyncratic signals from triggering.
• Frequent 'Wave 4' violations where price enters Wave 1 territory, indicating the Elliott Wave structure is invalid for the current asset.

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