Adaptive Efficiency Momentum (AEM)

Family: trend_following · Regime: trending · Complexity: high · Asset classes: FX (Majors), Indices (US30, GER40), Commodities (Gold) · Timeframes: H1, H4

Thesis

Trending markets exhibit higher follow-through when price action is 'efficient' (low noise) and backed by institutional volume (Order Blocks). By using Ehlers AGC to normalize momentum and HA-smoothed Stochastics for entry, we can filter out minor oscillations and capture institutional-backed trend legs. The edge exists because retail traders often enter on raw price noise (high entropy), whereas this system requires high-efficiency alignment.

Components

• Custom 006 Hybrid Table Scanner (regime) — Acts as a primary gatekeeper to ensure either a trend bias (EMA) or a volume spike is present before considering an entry.
• MultiKAMA (TyphooN) (direction) — Provides an adaptive trend baseline that stays flat in noise but accelerates during efficiency to define trade direction.
• OTLIB Stochastic Oscillator (Heikin-Ashi based) (entry) — Uses smoothed Heikin-Ashi data to trigger entries on momentum shifts, reducing the 'sawtooth' noise of standard price bars.
• MACD (exit) — Used as a momentum-exhaustion exit to capture profits before the adaptive trend fully reverses.
• Sonarlab - Order Blocks (risk) — Provides structural price levels (Supply/Demand) derived from high ROC moves to anchor Stop Loss and risk calculations.
• Ehlers Automatic Gain Control (AGC) (confirmation) — Normalizes the cycle amplitude, ensuring that entry momentum is measured relative to recent volatility levels rather than absolute values.
• Efficiency Ratio (Kaufman) (volatility_filter) — Filters out 'noise' and low-momentum ranging periods where the path length exceeds net displacement.

Known failure conditions

• Failure of the OTLIB Stochastic to stabilize (persistent repainting of historical signals).
• Market entering a 'mean-reverting channel' where ER fluctuates around 0.25 without sustained direction.
• Rapid sequential Order Block formation (zone clutter) indicating lack of clear institutional direction.

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