Rank-Normalized Non-Gaussian Momentum

Family: trend_following · Regime: trending · Complexity: medium · Asset classes: Equities, Forex, Crypto · Timeframes: H1, H4

Thesis

Market returns are not normally distributed; by using the Jarque-Bera test to detect non-normality and Rank Correlation to ensure trend 'neatness,' we enter trades only when a trend is structurally distinct from noise, using psychological round levels as structural support/resistance.

Components

• EMA with Dynamic Length Switch Logic (regime) — Acts as a hyper-sensitive trend filter to ensure the current price is moving in the trade direction with minimal lag.
• Momentum (direction) — Provides the primary directional bias; ensures price difference over 10 periods aligns with the trade.
• Rank Correlation Index (entry) — Identifies when price trends exhibit high rank-order consistency (Spearman correlation), filtering out noisy, non-directional volatility.
• Average True Range (NNFX) (exit) — Determines the profit target relative to current market volatility to avoid exiting too early in high-range environments.
• Round Levels Zone Shading (risk) — Defines market structure context for risk; stops are placed behind psychological barriers where liquidity typically clusters.
• Jarque-Bera Test (JB) (volatility_filter) — Filters for non-normal price distributions. High JB values suggest 'fat tails' or trending surges that deviate from a Gaussian random walk.

Known failure conditions

• Jarque-Bera remains below 5.99 for extended periods (persistent Gaussian noise).
• RCI oscillates rapidly between +/- 50 without reaching extremes.
• Price repeatedly violates Round Level zones without following through (liquidity traps).

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