VPCI Wave-Compression Pulse
Family: trend_following · Regime: trending · Complexity: high · Asset classes: Forex, Equities, Indices · Timeframes: H1, H4
Thesis
Market impulse waves (Elliott Waves 3 and 5) are most reliable when validated by volume-price convergence (VPCI) and preceded by price compression (Inside Bars). This hypothesis assumes that 'true' institutional trends are characterized by volume following price and that explosive moves typically follow periods of volatility contraction. By using Stochastic and Average Force, we enter at the resumption of momentum, minimizing the risk of entering during a protracted wave correction.
Components
- Volume Price Confirmation Indicator (VPCI) (regime) — Ensures that the Elliott Wave direction is supported by volume-price convergence, filtering out low-volume 'exhaustion' waves.
- Elliott Wave [LuxAlgo] (direction) — Identifies the primary trend direction and current cycle position (motive vs. corrective).
- Stochastic Oscillator (entry) — Provides the final micro-timing for entry, capturing the hook after a wave-level retracement.
- Average True Range (NNFX Version) (exit) — Provides a volatility-adjusted trailing stop and take-profit level based on recent market range.
- Equity Line Projection (risk) — Used to set the risk-of-ruin limits and dynamic position sizing based on projected floating P&L targets.
- Average Force (confirmation) — Confirms that the momentum is recovering from a pullback within the trend before triggering the entry.
- Inside Bars (MTF Framework) (volatility_filter) — Acts as a volatility contraction filter; ensures the entry occurs at a point of potential explosive breakout within the wave.
Known failure conditions
- Elliott Wave sequences repeatedly failing to reach Wave 3 targets (market in a permanent ranging state).
- VPCI values oscillating rapidly around zero, indicating volume is decoupled from price movement.
- Consecutive Inside Bars failing to result in directional expansion.
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