VIX-Contango Fractal Trend System

Family: trend_following · Regime: trending · Complexity: high · Asset classes: Equities, Equity Indices (SPX, NDX) · Timeframes: H1, D1

Thesis

Trend-following alpha is primarily found during periods of market 'calm' (VIX Contango) where price follows a predictable statistical linear path. By entering only after a price consolidation (Boxline) resolves in the direction of momentum and trend, we avoid low-conviction market noise. The use of Murrey Math levels provides a non-subjective exit strategy based on the underlying price fractal.

Components

• Linear Regression (LINREG) (regime) — Establishes the statistical path of least resistance; slope must align with the trade direction to ensure we are not fighting the mean price trajectory.
• Rate of Change (ROC) (direction) — Ensures positive momentum exists in the direction of the trend, filtering out 'dying' trends where price is still high but velocity has stalled.
• Triple Exponential Moving Average (EMA) (entry) — Acts as a trend-stacking confirmation; entries only occur when the three averages are in perfect sequential order (alignment).
• Murrey Math Line X (exit) — Provides discrete, non-arbitrary price targets and support/resistance zones based on fractal price action rather than moving averages.
• VIX Curve Regime (Simple) (risk) — Determines if the market is in a state of 'Contango' (stable) or 'Backwardation' (stress). Trend-following is statistically more reliable during Contango (Ratio < 1).
• Boxline (Range Breakout) (volatility_filter) — Filters out entries during erratic price movement; requires a period of consolidation followed by an expansionary breakout to trigger a trade.

Known failure conditions

• VIX/VIX3M ratio sustains above 1.10 while price continues to rise (divergence of risk and price).
• Murrey Math levels reset more than 3 times within a single trade duration, suggesting extreme volatility expansion.
• Linear Regression slope stays flat (near 0) for more than 50 bars.

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