Regression-Filtered Darvas Expansion Strategy
Family: breakout · Regime: trending · Complexity: medium · Asset classes: FX, Indices, Equities · Timeframes: M15, H1
Thesis
Market trends frequently extend after breaking out of both short-term consolidation (Darvas) and previous-day structural boundaries (DHL). By requiring both macro-structural breakouts and micro-consolidation breakouts to align with momentum (MACD) and trend envelopes (XARD), we isolate high-probability expansion phases. Risk is dynamically managed by the Standard Error of Regression, which assumes that price is less likely to revert beyond the statistical noise (dispersion) of the current linear trend.
Components
- Daily High Low (regime) — Establishes the macro-regime; entries are only permitted when price has broken out of the previous day's range, signifying a trend day.
- MACD Demo Implementation (direction) — Ensures the medium-term momentum is aligned with the breakout direction to avoid low-velocity range expansions.
- Darvas Boxes MetaTrader 5 (entry) — Identifies localized consolidation zones; the breakout of the box acts as the high-precision trigger.
- Qualitative Quantitative Estimation (QQE) (exit) — The fast-trailing volatility band serves as a dynamic exit, capturing momentum exhaustion before the stop is hit.
- Standard Error of Regression (STDERR) (risk) — Quantifies the 'noise' or dispersion around the current linear trend; used to set volatility-adjusted stops and position sizing.
- XARD Channel (confirmation) — Provides multi-MA confirmation that price is trading above/below long-term mean envelopes.
Known failure conditions
- Strategy produces > 5 consecutive losses in high-volatility ranging markets where DHL levels are breached and then immediately reclaimed.
- The STDERR value exceeds 3x its 100-period average, indicating parabolic blow-off phases where linear regression models fail.
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