Kendall-Stochastic Volatility Breakout

Family: breakout · Regime: trending · Complexity: high · Asset classes: FX Majors, Equities, Crypto · Timeframes: H1, H4

Thesis

The 'Kendall-Stochastic Breakout' hypothesis posits that price trends are most reliably captured when entering at the onset of a volatility expansion (PAM) following a period of high-rank correlation between price and time (NET). By requiring multi-symbol confirmation (Dashboard), we filter for macro-regime shifts rather than local noise. The edge exists because rank correlation (Kendall Tau) captures the 'purity' of a trend better than linear moving averages, allowing for entry before the 'herd' recognizes the trend via lagging filters.

Components

• Ehlers Noise Elimination Technology (NET) (regime) — Acts as the primary regime filter; Kendall Tau correlation ensures we only trade when a statistically significant trend (low noise) is present.
• ProfitRobots Dashboard Template (direction) — Filters for 'market-wide' direction by aggregating the NET regime signals across four correlated pairs to avoid idiosyncratic noise.
• Stochastic Oscillator (entry) — The trigger mechanism; uses a fast setting to capture momentum shifts immediately after the regime and volatility filters are met.
• Average True Range (ATR) (exit) — Provides a volatility-adjusted trailing exit to capture trend extensions while protecting against mean reversion.
• Annualized ROC / HV Ratios (risk) — Determines position sizing and stop loss based on annualized historical volatility (HV), ensuring risk is normalized to current market variance.
• Stochastic Oscillator (confirmation) — Ensures the entry occurs as momentum is emerging from a non-extreme zone, preventing buying into price exhaustion.
• PAM (Price Action Master) - Volatility Filter Version (volatility_filter) — Restricts entries to periods of 'compressed' volatility (ATR < threshold), anticipating a volatility expansion in the direction of the NET trend.

Known failure conditions

• NET remains in the -0.5 to 0.5 range for extended periods (market chop).
• Annualized HV spikes above 50% on intraday timeframes, indicating extreme instability.
• Correlations between the four dashboard pairs break down (e.g., USDJPY and EURUSD moving in the same direction consistently).

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