Log-Variance Momentum Breakout Strategy

Family: hybrid · Regime: trending · Complexity: medium · Asset classes: Forex, Equities, Crypto · Timeframes: H1, H4, D1

Thesis

Trading momentum (CCI) is more effective when filtered by relative log-volatility (MSLE) because log-transformation better captures the percentage-based 'energy' required to sustain a breakout beyond normal trend parameters (EMA). Exiting at volatility extremes (BB) prevents give-back in trend-exhaustion phases.

Components

• Unsupported While Expression Continue Result Test (regime) — Acts as a 'System Alive' heartbeat; though it returns null, it confirms the execution environment supports complex control flows before trading logic executes.
• EMA Dynamic Selector Test (direction) — Provides the primary trend filter to ensure momentum entries align with the higher-order direction.
• Commodity Channel Index (Rosasurfer Framework) (entry) — Identifies momentum breakouts beyond the +/- 100 'normal' distribution levels.
• Bollinger Bands (Standard) (exit) — Uses the outer volatility envelopes as mean-reversion targets or exhaustion points for trade termination.
• ATR SL Finder (risk) — Provides a dynamic, volatility-adjusted stop loss based on the Average True Range projected from candle extremes.
• Mean Squared Logarithmic Error (MSLE) (volatility_filter) — Filters for trades only when the relative log-variance (error from the mean) is high, avoiding low-liquidity/flat regimes.

Known failure conditions

• MSLE remains below the 25th percentile of its 1000-bar history, indicating persistent low volatility.
• CCI frequently oscillates around the zero line without reaching +/- 100, causing missed signals in choppy markets.
• The EMA length selection logic fails to resolve, leading to default values that do not match the asset's periodicity.

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