Zero-Lag Structural Mean Reversion

Family: hybrid · Regime: trending · Complexity: high · Asset classes: FX, Equities, Indices · Timeframes: H1, M15

Thesis

Mean reversion toward the intraday VWAP balance is more probable when aligned with the broader ZigZag-defined market structure. By using a zero-lag exit (ZLSMA), we can capture the meat of the corrective swing while theoretically filtering for 'ideal' direction using a lead-bias proxy.

Components

• ZigZag Color (Classic) (regime) — Defines the structural trend; only long trades are permitted if the last completed ZigZag leg was a swing low, and vice-versa.
• Unsupported named const comparison ternary negative history (direction) — Acts as a 'future-leak' bias or idealized direction filter. While prone to repainting, it serves to align current entries with the immediate projected price trajectory.
• OTLIB Stochastic Oscillator (entry) — Identifies tactical exhaustion within the ZigZag leg via LWMA-smoothed momentum.
• Zero Lag Least Squares Moving Average (ZLSMA) (exit) — A low-latency trend follower that exits the trade when price momentum relative to the LSMA curve shifts, indicating the end of the scalp.
• Average True Range (ATR) (risk) — Calculates stop distance (2x ATR) and determines position size based on current volatility.
• TimeBlocks (Multifunctional Period Separator) (volatility_filter) — Filters entries to only occur when price is at a 'discount' or 'premium' relative to the intraday VWAP balance within a specific time window.

Known failure conditions

• ZigZag depth is too small, causing excessive flip-flopping in ranging markets.
• The 'Direction' component fails to resolve in real-time execution due to platform restrictions on negative indexing.
• VWAP balance remains static during low-liquidity bank holidays, trapping trades in a dead zone.

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