Wavelet-Filtered Euro Volatility Momentum

Family: hybrid · Regime: trending · Complexity: high · Asset classes: FX (EUR/USD) · Timeframes: H1, H4

Thesis

EUR/USD momentum is most tradable when institutional volatility expectations (EVZ) are stable, allowing multi-resolution cycle filters (DWT) and smoothed oscillators (RSIOMA) to capture mid-term trends without being invalidated by high-frequency noise or macro-reversals.

Components

• Discrete Wavelet Transform (DWT) (regime) — Identifies the dominant market cycle by isolating the detail coefficient at level 4, filtering out high-frequency noise that causes false momentum signals.
• Unsupported UDF Switch Reassignment EMA (direction) — Serves as an 'infinite memory' anchor. Since the length grows with the bar index, it effectively requires price to stay above the cumulative average of the entire dataset to maintain a bullish bias.
• RSIOMA (RSI of Moving Average) (entry) — Provides a smoothed momentum entry signal. By calculating RSI on an EMA, it reduces the whipsaws common in standard RSI while pinpointing trend acceleration.
• Moving Average Convergence Divergence (MACD) (exit) — Captures momentum exhaustion. A signal line cross against the trade direction acts as a sensitive exit trigger before price action fully reverses.
• Euro FX VIX (EVZ) Data Loader (risk) — Ensures the strategy only operates during specific volatility regimes. High EVZ often implies chaotic, non-trending price action in EUR/USD.
• DEMA 200 & ADX Combined HUD (confirmation) — Confirms that the market is in a sustained trend (DEMA 200) with sufficient strength (ADX > 20) to overcome transaction costs.
• ATR SL Finder (volatility_filter) — Dynamically calculates the stop-loss level based on local volatility, ensuring the trade has room to breathe relative to current range.

Known failure conditions

• EUR/USD volatility (EVZ) sustains levels above 15, indicating macro-uncertainty where technical trends break down.
• RSIOMA histogram remains flat while price trends, indicating the smoothing is too aggressive for the current timeframe.
• The UDF EMA lag exceeds the dominant market cycle, rendering the directional filter permanently stale.

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