Autocorrelated Log-Error Trend Hunter

Family: trend_following · Regime: trending · Complexity: high · Asset classes: FX, Equities, Crypto · Timeframes: H1, H4, D1

Thesis

Markets are most tradable when price movement is not just directional, but also 'persistent' (high autocorrelation) and 'stable' (low logarithmic error relative to its mean). By using the ACF to confirm that momentum isn't a random spike and MSLE to filter out erratic volatility, we can enter trends with higher confidence. The edge exists because retail traders often chase any momentum (CCI), whereas this strategy requires the momentum to be backed by structural trend (EMA) and statistical self-similarity (ACF).

Components

• Extrem SuperTrend (regime) — Defines the medium-term market regime and provides a trailing stop-loss structure based on median price logic.
• Exponential Moving Average (EMA) (direction) — Acts as the primary directional anchor to ensure trades are only taken in the direction of the long-term secular trend.
• CCI Arrows (entry) — Provides the tactical entry signal when momentum crosses the zero-line midline, indicating a shift from bearish to bullish momentum (or vice-versa).
• Relative Strength Index (Standard) (exit) — Identifies momentum exhaustion points to trigger early profit-taking before trend reversals occur.
• ATR Stop Loss Finder (risk) — Sets the initial hard stop-loss based on recent realized volatility to prevent premature exits during noise.
• Autocorrelation Function (ACF) (confirmation) — Confirms trend persistence; a positive lag-1 autocorrelation suggests that the current price direction is likely to continue rather than mean-revert.
• Mean Squared Logarithmic Error (MSLE) (volatility_filter) — Filters for 'stable' volatility; high MSLE suggests price is deviating erratically from its internal average, signaling a regime of high uncertainty.

Known failure conditions

• If ACF stays near zero for >50 bars, indicating a lack of serial correlation/random walk price action.
• If SuperTrend flips direction more than 3 times within a 20-bar window (sideways churn).
• If MSLE remains at historical extremes, suggesting the price-to-average relationship has broken down.

Explore the full interactive blueprint with parameter ranges and evidence on WOBR StrategyVerse, or generate this strategy as an MT4/MT5 Expert Advisor with QuantMogul AI Engine (free download).