Decaying Dynamic GARCH Momentum Strategy

Family: hybrid · Regime: trending · Complexity: high · Asset classes: Equities, Forex · Timeframes: H1, D1

Thesis

Momentum breakouts (TSI_CD) carry a higher probability of continuation when confirmed by a non-linear classifier (NNind) and filtered by a long-term dynamic average that ignores short-term noise as the market history expands. The use of GARCH volatility ensures that risk is normalized against clustering market fear.

Components

• Array Sort Unsupported Order Test (regime) — Acts as a 'system integrity' regime filter; the strategy only operates if the environment returns the expected default value (2) from the unsupported sort attempt.
• Unsupported UDF Final Switch Const Reassignment Qualifier (direction) — Provides a 'decaying' trend filter. By using bar_index as the EMA length, the trend sensitivity decreases as the session progresses, favoring only significant long-term structural moves.
• TSI Convergence Divergence (TSI_CD) (entry) — Detects shifts in momentum via histogram color changes, signaling potential trend acceleration or exhaustion.
• MACD (exit) — Standard trend-following exit to capture the meat of a move while exiting when momentum rolls over.
• Conditional Volatility (CV) (risk) — Uses GARCH(1,1) logic to dynamically set stop-loss distances and position sizes based on volatility clustering.
• Neural Network Indicator (NNind) (confirmation) — Validates the TSI signal using non-linear price action features (CLV) to filter out choppy false positives.

Known failure conditions

• The bar_index EMA exceeds a length of 5000, rendering the trend filter effectively a flat line insensitive to any price action.
• Conditional Volatility remains below 5% for extended periods, leading to excessively large position sizes in 'quiet' but illiquid markets.
• TSI_CD color flipping occurs on >70% of bars in a 20-bar window (regime breakdown).

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