VIX-Filtered Structural Momentum (VFSM)

Family: hybrid · Regime: trending · Complexity: medium · Asset classes: Equities, Equity Indices (SPY, QQQ) · Timeframes: H1, D1

Thesis

Price trends manifest through a sequence of breaks in market structure (BOS), but these signals are only reliable when the broader volatility regime (VIX Term Structure) is stable and momentum (ROC) confirms the directional shift. By using a lagging macro-filter (ZigZag) and a leading volatility filter (VIX ratio), the strategy identifies high-probability 'sweet spots' in the equity market cycle.

Components

• ZigZag (regime) — Used to define the macro structural bias based only on the last 'fully confirmed' swing point to avoid trading against major cycle levels.
• Rate of Change (ROC) (direction) — Ensures that the micro-structural breakout is supported by measurable percentage momentum in the direction of the trade.
• BOS_CHoCH_Detector (entry) — Acts as the trigger mechanism, identifying localized breaks of structure (BOS) or changes of character (CHoCH) that signal trend continuation or reversal.
• HiLo Activator (Gann Style) (exit) — Provides a dynamic trailing stop based on moving averages of highs/lows, allowing the strategy to ride trends until price closes on the wrong side of the threshold.
• VIX Curve Regime (Simple) (risk) — Determines position sizing and risk tolerance; market stress (Backwardation) mandates smaller sizes or no trades, while stability (Contango) allows for full risk.

Known failure conditions

• The VIX/VIX3M ratio remains in permanent backwardation (ratio > 1) during a sustained market rally, preventing participation.
• Price enters a 'broadening wedge' formation where ZigZag swings and BOS signals are triggered on both sides with high frequency.
• A significant gap-down occurs through the HiLo Activator trailing stop, leading to slippage beyond the risk model.

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