Ordered Darvas Liquidity Breakout
Family: breakout · Regime: trending · Complexity: medium · Asset classes: Equities, FX, Crypto · Timeframes: 15m, 1h, 4h
Thesis
The hypothesis is that successful trend expansions occur when a price breakout (Darvas) is supported by institutional accumulation (CMF) and follows a clear 'cleaning' of local liquidity (Daily Sweep). By utilizing a zero-lag exit (ZLSMA), the strategy attempts to capture the 'meat' of the move while exiting quickly when the momentum-order (regime) breaks down. The 'order=close' regime assumes that for a breakout to be valid, the immediate candle direction must align with the intended trade direction to represent an 'ordered' market state.
Components
- Unsupported array.sort_indices Order (regime) — Used as a 'Structural Orderliness' filter. Since the indicator uses 'close' as a sorting constant, it represents a regime where price direction (order) dictates the sorting of market priorities. Longs are permitted when the market is in an 'Ascending' price order (Close > Open).
- Chaikin Money Flow (CMF) (direction) — Provides the directional bias by measuring institutional accumulation or distribution. Prevents taking breakouts against the underlying volume flow.
- Darvas Boxes Modern/Classic (entry) — Identifies consolidation breakouts. The 'upSignal' and 'dnSignal' serve as the primary execution triggers for momentum expansion.
- Zero Lag Least Squares Moving Average (ZLSMA) (exit) — Acts as a trailing exit mechanism that reacts faster than standard MAs to preserve gains during trend exhaustion without the lag of a standard LSMA.
- The Daily Sweep (risk) — Provides the structural stop-loss level. The 'Sweep Bullish' or 'Sweep Bearish' levels define where liquidity was taken, serving as the ultimate invalidation point for the trade.
Known failure conditions
- CMF remains near zero for extended periods while Darvas boxes trigger multiple whipsaws.
- Price breaches the Daily Sweep level before hitting the ZLSMA exit, indicating the sweep was a trend reversal rather than a liquidity grab.
- High volatility sessions where the ZLSMA 'overshoots' price, leading to late exits on parabolic moves.
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