REI Volatility Expansion Breakout

Family: breakout · Regime: high_vol · Complexity: medium · Asset classes: Forex, Equities, Crypto · Timeframes: H1, H4

Thesis

Market trends are often preceded by periods of compression (consolidation). True breakouts from these zones are characterized by a sudden increase in price velocity (measured by REI) and volume participation. By requiring price to move beyond its standard deviation (Bollinger Bands) and outside a structural box while volume is rising, we filter for high-conviction moves and use accelerating stops (SAR) to capture the heart of the resulting impulse.

Components

• Range Expansion Index (REI) (regime) — Acts as the regime filter by ensuring the market is not in a 'dead' or noise-heavy state; only trades when REI is non-zero, indicating price velocity.
• PineForge demo (direction) — Used to define the core trend direction by comparing the current price (close) relative to the Bollinger SMA.
• Bollinger Bands (Standard) (entry) — Provides the specific entry trigger when price pierces the outer bands following a consolidation breakout.
• CCI / Connectable [Azullian] (exit) — Signals trend exhaustion or reversal when the commodity channel index returns from extreme levels.
• Parabolic SAR (risk) — Provides a dynamic, accelerating trailing stop that locks in profits during impulsive moves.
• Volume Moving Average (VOLMA) (confirmation) — Confirms that the breakout and band-piercing are supported by tick activity, reducing the probability of low-liquidity 'fakeouts'.
• Boxline (Consolidation Zones) (volatility_filter) — Identifies the structural boundaries of consolidation; a breakout from the box is required to initiate volatility expansion.

Known failure conditions

• Price stays within the Bollinger Bands for extended periods despite Boxline breakouts.
• Tick volume is consistently below the VOLMA during high-volatility price spikes.
• REI remains at zero during significant price movements, indicating the price action does not meet DeMark's velocity criteria.

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