Recursive Force Mean Reversion
Family: hybrid · Regime: trending · Complexity: medium · Asset classes: Equities, Forex, Crypto · Timeframes: H1, M15, M30
Thesis
Markets exhibit a tendency to revert to volume-weighted mean prices (VWAP) after momentum-driven expansions. By using high-order recursive smoothing to confirm the underlying trend and Average Force to identify momentum shifts, we can enter positions when the 'logarithmic error' (MSLE) suggests a sustainable move is occurring. The core edge lies in filtering entries through recursive iteration and exiting at the session's volume-weighted equilibrium.
Components
- Indicator Sample (Bar Count Logger) (regime) — Serves as a data-integrity filter, ensuring the recursive and logarithmic indicators have sufficient historical depth to stabilize before signals are valid.
- Average Force (direction) — Used to identify the immediate directional bias by centering price position within a rolling range; a zero-cross indicates a shift in the balance of power.
- Legacy Trading Connector (OptionX) (entry) — Acts as the execution gateway, translating the combined logic of momentum and trend into actionable entry signals.
- Volume Weighted Average Price (VWAP) (exit) — Serves as the ultimate 'fair value' target; positions are held until price regresses to the volume-weighted mean of the current session.
- Mean Squared Logarithmic Error (MSLE) (risk) — Provides a volatility-adjusted risk metric that penalizes large relative deviations, used to set stop-loss distances and scale position sizes based on trend 'error' magnitude.
- Recursive Moving Average Unlimited (confirmation) — Filters out market noise through high-order iteration, ensuring the entry is aligned with a persistent underlying trend rather than a local spike.
Known failure conditions
- MSLE values remain consistently near zero, indicating a total lack of volatility/movement.
- Price oscillates around the VWAP for extended periods (choppy session), leading to exit-churn.
- Chart history depth falls below the minimum required for RMAU stability.
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