Mean Discovery Point Breakout

Family: volatility · Regime: trending · Complexity: medium · Asset classes: Forex, Indices, Crypto · Timeframes: H1, M15

Thesis

Market breakthroughs are most reliable when directional momentum is supported by a underlying directional bias (Mean Error) and occur in environments where liquidity (Spread) is stable. By using a point-based grid for risk, we standardize the reward/risk ratio against market architecture rather than short-term ATR fluctuations.

Components

• Mean Error (ME) (regime) — Determines the trend bias (regime). A positive/negative mean error suggests price is consistently deviating from its moving estimate, identifying directional drift.
• Momentum Oscillator (direction) — Provides the primary directional impulse required to confirm the move.
• Keltner Channels (entry) — The breakout of the outer band serves as the structural entry trigger.
• Parabolic SAR (exit) — Provides a non-subjective trailing stop that accelerates as the trend matures.
• Point-Based Price Grid (risk) — Establishes a fixed architectural 'anchor' for stop levels and risk calculation to avoid variable volatility noise.
• Corrected RSX (confirmation) — Acts as a noise-reduction filter to ensure momentum is not just 'hot air' but a sustained reversal or continuation.
• Spread Monitor (Tick-Level) (volatility_filter) — Prevents entry during illiquid gaps or high-cost news events where the spread exceeds recent averages.

Known failure conditions

• Mean Error stays near zero while price oscillates wildly, causing range-bound whipsaws.
• Spread Monitor shows frequent spikes that inhibit all entries during high-probability setups.
• Price breaks Keltner bands but fails to clear even one 30-point grid level before reversing.

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