Recursive Index Channel Mean Reversion

Family: hybrid · Regime: trending · Complexity: medium · Asset classes: Forex · Timeframes: H1, H4

Thesis

Broad-based currency strength (Darwinex Index) provides a reliable macro regime. Within this regime, price noise can be filtered using iterative smoothing (Recursive MA). Edge is found when price reaches extreme deviations from its mean (Ghost Channels) or exhibits high-intensity momentum (Urgency), but only when volatility is sufficient to support a sustained move. This hypothesis assumes that currency trends are driven by central bank flows reflected in the aggregate index, while local pair prices revert to regression channels.

Components

• Darwinex Labs Currency Index (regime) — Filters trades by ensuring the base currency is experiencing broad-based strength/weakness across the entire market, not just the specific pair.
• Recursive Moving Average Unlimited (direction) — Provides a highly smoothed trend trigger that filters out high-frequency noise through multiple iterations.
• Ghost Channels [mph1nance] (entry) — Identifies mean-reversion opportunities within the established trend by flagging price excursions to the outer linear regression rails.
• ATR SL Finder (exit) — Provides a volatility-adjusted exit and stop-loss level based on recent realized range.
• TMA Risk Panel (risk) — Dynamically adjusts position size based on the distance between entry and the ATR-defined stop loss to maintain constant equity risk.
• Standard Deviation (volatility_filter) — Ensures trades are only taken during periods of high market participation (volatility expansion).

Known failure conditions

• Darwinex Index remains flat for extended periods while the specific pair trends (decoupling).
• Price consistently hugs the Ghost Channel rails without reverting to the mean (strong breakout regime).
• Standard Deviation remains below the 80th percentile for long durations, leading to no trade activity.

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