Wavelet-PVT Regime Hybrid

Family: hybrid · Regime: trending · Complexity: high · Asset classes: Equities, FX, Crypto · Timeframes: 1H, 4H, Daily

Thesis

Market trends are most tradable when a dominant structural regime (Mode) aligns with a cyclical expansion (Wavelet) and is confirmed by volume participation (PVT). By filtering momentum (RSI) through these layers and sizing positions according to historical efficiency (ROC/HV), one can capture the meat of a trend while avoiding low-liquidity noise.

Components

• Mode of String Array (Compatibility Test) (regime) — Determines the 'Market State' (e.g., 'Bullish', 'Bearish', 'Ranging') by finding the most frequent occurrence of predefined string classifications over a rolling window, providing a regime filter.
• Discrete Wavelet Transform (DWT) (direction) — Decomposes price into cycles; the first detail level (d1) crossing zero identifies the start of a local cyclical impulse filtered by wavelet-based noise reduction.
• Relative Strength Index (RSI) (entry) — Ensures momentum is aligned with the wavelet cycle; avoids entering late-stage impulses where RSI is already overextended.
• Heikin-Ashi Candles (exit) — Provides a noise-filtered exit signal; specifically, the first counter-trend color change signifies the exhaustion of the immediate price thrust.
• Annualized ROC / HV Ratios (risk) — Determines risk-adjusted position sizing; higher ratios (efficient trends) warrant higher capital allocation, while the HV denominator defines the stop-loss distance.
• Price and Volume Trend (PVT) (confirmation) — Validates that the price move is backed by cumulative volume flow; prevents entering on low-liquidity spikes.

Known failure conditions

• DWT lag at level 4 exceeds the duration of the cycle it is meant to capture.
• The string mode remains 'Neutral' indefinitely during low-volatility drifts, preventing all entries.
• RSI and DWT signals become perfectly correlated during high-volatility events, removing the benefit of signal diversity.

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