RAE-Opening Range Momentum Trend System
Family: trend_following · Regime: trending · Complexity: high · Asset classes: Equities (Indices), Forex Majors · Timeframes: M5, M15
Thesis
Intraday trends exhibit the highest signal-to-noise ratio after the initial 30-minute market opening volatility. By filtering price through Heiken Ashi and Ichimoku structure, and timing entries with ADX momentum, we can exploit the 'continuation phase' of the day. The use of RAE for stop-loss calculation assumes that if price 'error' or deviation from the mean increases, the volatility environment has changed, requiring wider risk parameters to avoid premature stop-outs during trend-health fluctuations.
Components
- Heiken Ashi (regime) — Acts as a primary trend filter (regime) to ensure the strategy only operates in the direction of smoothed price momentum.
- Ichimoku Kinko Hyo (direction) — Provides market structure confirmation; price must be on the correct side of the Kumo (cloud) and Tenkan/Kijun cross for a directional bias.
- ADX / Connectable [Azullian] (entry) — The execution trigger. It ensures that the identified trend has sufficient strength (ADX rising) and directional momentum (DI cross) to warrant entry.
- Trepidity Opening Range with Extensions (exit) — Provides fixed intraday targets based on the session's initial volatility, offering logical profit-taking levels regardless of late-day chop.
- Relative Absolute Error (RAE) (risk) — Used to dynamically scale the stop-loss; higher error relative to the mean indicates 'unstable' price action, requiring wider stops.
- Average True Range (Standard MQ4) (volatility_filter) — Filters out low-volatility 'dead zones' where spreads and slippage would erode trend-following profits.
Known failure conditions
- The strategy fails if the Opening Range is frequently wider than the entire daily range (range contraction).
- Failure occurs if RAE remains static during high-volatility breakouts, indicating it is not capturing the deviation from the mean effectively.
- Strategy is invalidated if the asset enters a 'high-volatility/no-trend' regime (whipsaw).
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