VHF High-Efficiency Trend Rider

Family: trend_following · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Commodities · Timeframes: H1, H4

Thesis

Trends are most profitable when they exhibit high 'efficiency' (VHF) and are backed by unusual volume (RVOL). By entering on a brief momentum pause (Stochastic) within an established trend (SMA) while avoiding external shocks (News), we capture the highest-velocity segment of a price move.

Components

• Vertical Horizontal Filter (VHF) (regime) — Used as a regime filter to ensure the strategy only operates when the market is sufficiently 'trending' (VHF > threshold), avoiding the 'whipsaw' characteristic of mean-reversion in congestion.
• Simple Moving Average (SMA) (direction) — Provides the primary directional bias; longs are only permitted when price is above the SMA.
• Stochastic Oscillator (ta.stoch) (entry) — Identifies short-term mean-reversion entries (dips) within the larger trend identified by the SMA and VHF.
• Momentum (MOM) (exit) — Used to exit positions when the velocity of the trend fades, specifically when MOM crosses back through the zero line.
• News Indicator NMNNFX (risk) — Acts as a hard 'No-Trade' filter; entries are blocked if high-impact news events are imminent to avoid slippage and unpredictable volatility.
• RVOL (Relative Volume) (confirmation) — Confirms the validity of the trend regime; high VHF must be accompanied by high RVOL to suggest institutional participation.
• Bollinger Bands (volatility_filter) — Used to ensure the market is not 'overextended'—entries are filtered if price is outside the bands, preventing buying at the absolute peak of a move.

Known failure conditions

• VHF remains below 0.3 for extended periods despite clear price movement (suggesting 'stair-stepping' rather than trending).
• Stochastic 'embeds' in overbought/oversold territory for duration of trend, causing missed entries.
• News events cause price gaps that bypass MOM-based exit logic.

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