SML-KNN Entropy Sentinel
Family: hybrid · Regime: trending · Complexity: high · Asset classes: Equities, Crypto, Forex · Timeframes: 1H, 4H
Thesis
Markets rotate between high-entropy noise and structural order. By using an S/R Matrix (SML) to identify structural order and a KNN-refined Volume SuperTrend to confirm momentum, we can capitalize on price bounces at liquidity clusters. The 'unsupported' diagnostic indicators act as a sentinel; when market structure becomes too complex for simple classification (high label count), the strategy assumes a breakdown in predictability and stands aside. Risk is uniquely mitigated by Alpha factors (238, 51, 262) which identify the 'real' volatility floor beneath the noise.
Components
- Unsupported array abs label method (regime) — Used as a 'Structural Entropy' filter; trades are only permitted when the number of active labels in the SML matrix is below a threshold, assuming that excessive label generation signals a non-trending, noisy regime.
- Unsupported matrix remove_col (direction) — Acts as a baseline trend filter using the price series; despite the matrix error, the underlying 'plot(close)' provides the directional bias (Price > MA).
- SML — SUPPORT/RESISTANCE MATRIX (entry) — Identifies high-probability reversal or bounce zones based on historical pivot clusters and retests.
- MACD (exit) — Provides the primary exit signal through histogram momentum exhaustion or signal line crossovers.
- GAS Price Levels (risk) — Calculates dynamic stop-loss levels and position sizing based on a weighted blend of Alpha factors (238, 51, 262) and Bollinger Band volatility.
- Volume SuperTrend AI (Expo) (confirmation) — Validates the SML entry by ensuring the volume-weighted trend and KNN classification agree with the trade direction.
Known failure conditions
- Price consistently breaches SML zones without any KNN classification delay, indicating a breakdown in pivot reliability.
- GAS Alpha factors show zero correlation with price delta (IC < 0.05), rendering volatility-based stops arbitrary.
- High regime 'entropy' (label array overflow) persists for >50% of the backtest period, preventing signal execution.
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