RLS Adaptive Daily Breakout System

Family: breakout · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Gold · Timeframes: M15, H1

Thesis

Market participants anchor their sentiment to the previous day's high and low; a breakout of these levels, when aligned with an adaptive trend regime (RLS) and cyclical momentum (STC), indicates a high-probability continuation of the impulsive move. The edge is based on the behavioral tendency for breakouts to lead to intraday trends during high-volatility sessions.

Components

• Recursive Least Squares Adaptive Filter (RLS) (regime) — Establishes the primary trend regime; price must be on the correct side of this adaptive filter to filter out market noise more effectively than standard MAs.
• Buddha Price Line (direction) — Acts as a final tick-direction filter, ensuring that the bar-to-bar price movement is actually positive for longs or negative for shorts.
• Daily High Low MTF (entry) — Provides structural breakout levels. Breaching the previous day's extreme signals a shift in market participant sentiment for the current session.
• Mass Index (MI) (exit) — Used as an exhaustion filter; identifies trend reversals via range expansion/contraction analysis.
• Chandelier Exit (Heiken Ashi) (risk) — Provides a tight trailing stop and the basis for volatility-adjusted position sizing using smoothed HA candles.
• Schaff Trend Cycle (STC) (confirmation) — Confirms cyclical momentum alignment to avoid late entries into exhausted trends.

Known failure conditions

• Price consistently fails to trend after breaking Daily High/Low levels (Mean Reverting Regime).
• STC plateaus at 100 or 0 while price makes significant counter-trend moves.
• RLS filter becomes unstable (oscillating) during low volatility periods.

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