Macro-Filtered Darvas Relative Strength Breakout
Family: breakout · Regime: trending · Complexity: high · Asset classes: Equities, Forex, Crypto · Timeframes: H4, D1
Thesis
The hypothesis is that breakouts of consolidation ranges are most likely to persist when (1) global macro-financial stress is low, (2) the asset is outperforming its peer group, and (3) price action structure (engulfing levels) supports the move. This edge exists because low-volatility environments encourage trend-following behavior among institutional participants, and relative strength identifies where capital is actively flowing.
Components
- Macro Risk Dashboard v8.2 (regime) — Acts as the primary volatility and liquidity filter; trades are only permitted when macro stress signals are low (Composite < 40), ensuring the strategy operates in orderly markets.
- Darvas Boxes (Multi-Mode) (direction) — Defines the directional bias and identifies consolidation ranges. We trade the breakout of the high/low of the current box.
- Commodity Channel Index (CCI) (entry) — Used as the tactical entry trigger to ensure momentum is accelerating in the direction of the breakout.
- Moving Averages (Multi-Method) (exit) — The Linearly Weighted MA acts as a trailing stop/exit mechanism to capture the meat of the trend while exiting quickly on reversals.
- Performance Table (risk) — Determines position sizing based on relative performance. Higher relative strength (for longs) or weakness (for shorts) against the peer group increases the risk allocation.
- Roshaneforde Pivot Levels (confirmation) — Provides structural confirmation via candle engulfing patterns. A breakout must occur relative to these persistent support/resistance levels to be valid.
Known failure conditions
- The Macro Risk Dashboard fails to signal during a systemic liquidity crunch due to reporting lags.
- Correlations across the Performance Table symbol list converge to 1.0, neutralizing the relative strength edge.
- Market enters a 'permachop' regime where Darvas Boxes are narrower than the average spread.
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