RWI Displacement Trend-Follower

Family: trend_following · Regime: trending · Complexity: medium · Asset classes: Equities, Forex, Crypto · Timeframes: H1, H4, D1

Thesis

The strategy assumes that market trends are only tradable when price displacement exceeds the expected variance of a random walk. By using the Random Walk Index (RWI) to confirm 'non-random' movement, the strategy filters out low-conviction signals from the UT Bot indicator, which often suffers from whipsaws in ranging markets. The edge lies in the confluence of displacement (RWI), direction (SMA), and volatility-adjusted momentum (UT Bot).

Components

• Random Walk Index (RWI BTF) (regime) — Acts as the primary volatility/trend filter; ensures that momentum entries are only taken when price displacement significantly exceeds what is expected from a random walk (RWI > 1.0).
• Simple Moving Average (SMA) (direction) — Provides the macro trend bias to ensure trade direction aligns with the broader market flow.
• UT Bot Alerts (MQL5) (entry) — Identifies specific execution points by combining ATR-based volatility channels with price action shifts.
• Bears Power (exit) — Used for exit logic; specifically looking for momentum exhaustion where selling pressure (or lack thereof) suggests the trend leg is over-extended.
• FractalScanner (risk) — Provides non-arbitrary, structure-based stop loss levels derived from local swing highs and lows.

Known failure conditions

• RWI remains consistently below 1.0 for extended periods, indicating a permanent shift to mean-reverting noise.
• Average trade duration falls below 3 bars, suggesting the UT Bot and ATR settings are too sensitive for the asset's noise floor.
• Fractal-based stop losses are consistently hit before the first momentum exit (Bears Power) is triggered.

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