Savitzky-Ehlers Structural Mean Reversion

Family: hybrid · Regime: mixed · Complexity: high · Asset classes: Equities, FX, Crypto · Timeframes: H1, H4, D1

Thesis

Market structure reversals (Head & Shoulders) are most reliable when they coincide with volatility extremes (Bollinger Bands) and are supported by a noise-filtered trend (Savitzky-Golay). By using Median Absolute Error (MdAE) instead of standard deviation for risk, the strategy survives 'tail' events that stop out traditional mean-reversion systems. The edge lies in the intersection of structural geometry and robust volatility estimation.

Components

• Unsupported array.sum UDT method (regime) — Serves as a 'Structure Integrity' filter; trading is suspended if price action lacks enough discrete 'Point' objects to form a valid structural array, representing a chaotic/non-standard regime.
• HS Indicator (Head & Shoulders) (direction) — Identifies the directional bias based on structural exhaustion (H&S) or accumulation (iH&S) with strict symmetry requirements.
• Bollinger Bands (entry) — Provides the volatility-based trigger for entry after the H&S pattern has signaled the directional bias.
• Ehlers Center of Gravity (CG) (exit) — Exits the position when the cycle's balance point shifts, capturing the meat of the move before mean reversion completes.
• Median Absolute Error (risk) — Used for volatility-adjusted stop losses; it measures the robust median prediction error to ensure stops are outside the noise floor.
• Candles Overlay Template (confirmation) — Final confirmation; ensures the entry candle's internal structure (OCHL) aligns with the intended direction before execution.
• Savitzky-Golay Filter (SGF) (volatility_filter) — Filters out high-frequency market noise, ensuring the strategy only enters when the underlying smoothed trend slope supports the pattern direction.

Known failure conditions

• The H&S pattern detector generates overlapping/conflicting patterns on more than 3 consecutive bars.
• MdAE values drop below 0.01% of asset price, indicating a frozen/non-volatile market where BB triggers are meaningless.
• SGF slope remains neutral (zero) during a confirmed H&S neckline breakout.

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