Non-Normal Harmonic Cycle Mean Reversion

Family: hybrid · Regime: high_vol · Complexity: high · Asset classes: FX, Equities, Crypto · Timeframes: 1H, 4H, 1D

Thesis

Market participants overreact during periods of non-normal price movement (detected by the Jarque-Bera test), creating 'fat tails'. These impulsive moves often terminate in predictable geometric ratios (Harmonic Patterns) as profit-taking occurs. By isolating the cyclical component of price via a Bandpass Filter and anchoring risk to institutional 'Value Areas' (POC), we can capture the reversal to mean before the non-normality subsides.

Components

• Jarque-Bera Test (JB) (regime) — Used as a regime filter to ensure the strategy only operates when price action is non-normal (high skew/kurtosis), indicating a strong momentum move or volatility expansion.
• Supported indicator max boxes count (direction) — Used to confirm that price is actively forming new 'boxes' or price ranges, ensuring the direction of the trade follows the immediate price trajectory.
• Custom Pattern Detection (Harmonic Designer) (entry) — Identifies specific geometric exhaustion points (XABCD patterns) where price is likely to reverse based on Fibonacci ratios.
• Money Flow Index (MFI) (exit) — Provides a volume-weighted exit signal to capture the meat of the move before momentum exhaustion.
• Volume Profile + Pivot Levels [ChartPrime] (risk) — Determines risk parameters by placing stops at the high-volume Point of Control (POC) or key supply/demand pivots.
• Bandpass Filter (BPF) (confirmation) — Isolates the cyclical frequency of price to confirm that the Harmonic Pattern is forming within a clear oscillatory wave rather than noise.

Known failure conditions

• Price action becomes perfectly Gaussian (JB values consistently below 5.0), leading to no signals.
• The Point of Control (POC) shifts rapidly during a trade, indicating a total migration of value and invalidating the original risk premise.
• Bandpass Filter produces high-frequency oscillation (noise) in a low-volatility environment.

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