Relative Strength Currency Flux
Family: hybrid · Regime: trending · Complexity: high · Asset classes: Forex, Equities (Indices) · Timeframes: H1, H4
Thesis
Currency trends are driven by institutional capital flows that manifest as sustained outperformance against both a benchmark index and a geometric basket of peer currencies. By entering only when the 'lowest' price is unable to penetrate the short-term mean (Bears Power > 0) and the price is above the daily volume-weighted average (VWAP), we capture the meat of a momentum move. Risk scaling via Relative Absolute Error ensures lower exposure when price action deviates from historical predictability.
Components
- Darwinex Labs Currency Index (regime) — Filters for currency-specific strength; ensures the base currency is in a macro-uptrend relative to a broad basket, not just the single pair.
- Volume Weighted Average Price (VWAP) (direction) — Acts as the intraday/intra-session value benchmark; price above VWAP indicates buyers are paying a premium relative to the day's average.
- Relative Strength Line [WavesUnchained] (entry) — Provides the execution trigger by ensuring the symbol is outperforming the benchmark (Mansfield > 0) and price is above its own trend filter.
- Parabolic SAR (exit) — Used as a dynamic, accelerating trailing stop to lock in profits during momentum bursts and exit quickly on trend reversals.
- Relative Absolute Error (RAE) (risk) — Quantifies the 'predictability' or noise level of the current price action to determine position size and stop-loss distance.
- Bears Power (confirmation) — Confirms that even the lowest price of the bar is unable to penetrate the EMA (BearsPower > 0), signifying total buyer dominance.
Known failure conditions
- Darwinex Index stays flat while the specific pair trends, indicating the trend is driven by quote-currency weakness rather than base-currency strength.
- RAE values consistently exceed 1.0, suggesting price action has become random and the model's error exceeds a simple mean.
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