KNN-DHL Range Impulse System

Family: breakout · Regime: trending · Complexity: high · Asset classes: FX Major Pairs, Equity Indices, Gold (XAUUSD) · Timeframes: H1, H4

Thesis

Market breakouts beyond the previous day's extreme boundaries are likely to be sustained impulse waves if they align with a KNN-based trend prediction and lack opposing momentum pressure. This edge exists because Daily High/Low levels act as major liquidity traps; a clean break supported by algorithmic trend-following indicates a high-conviction move by institutional participants.

Components

• AI Trend Navigator [K-Neighbor] (regime) — Acts as a non-linear trend filter to ensure the breakout aligns with the predicted path based on historical price-state similarities.
• Bears Power (direction) — Used to confirm momentum direction; specifically, long entries require minimal selling pressure (Low > EMA) while short entries require significant selling pressure.
• Daily High Low (entry) — Provides the structural trigger point; breakouts of yesterday's high or low represent a shift in daily liquidity.
• Momentum (MOM) (exit) — Captures the exhaustion of the breakout move; an exit is triggered when velocity slows or reverses.
• Elliott Wave [LuxAlgo] (risk) — Utilizes structural pivot points (Wave 2 or 4 lows for longs) to set logical stop losses based on market cycles rather than arbitrary pips.

Known failure conditions

• Price oscillates inside the previous day's range for > 72 hours (extreme compression).
• Elliott Wave indicator fails to identify any pivots for 50+ bars, making risk management impossible.
• KNN prediction and Momentum provide conflicting signals for extended periods, indicating a regime shift to high-noise ranging.

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