DEMA-IAE Confluence Breakout System

Family: trend_following · Regime: trending · Complexity: high · Asset classes: Forex (Majors), Equities (Large Cap), Crypto (Top 10) · Timeframes: 15M (Execution), 1H (Trend), D1 (Volatility Filter)

Thesis

Sustainable price trends are preceded by a period of volatility contraction and confirmed by a multi-timeframe breakout above previous daily extremes. By entering only when ADX confirms momentum and DEMA confirms the long-term regime, we filter out false breakouts. The edge is maintained by using a multi-modal confluence score (IAE) to exit based on technical exhaustion rather than lagging price triggers, while maintaining structural risk discipline through a fixed point-grid.

Components

• DEMA 200 & ADX Combined HUD (regime) — Acts as the primary trend and momentum filter to ensure trades are only taken in high-conviction environments.
• HiLo Activator (Pandini Version) (direction) — Provides intermediate trend bias by tracking the dynamic average of price extremes.
• Donchian Channels (DC) (entry) — Identifies volatility breakouts beyond recent price structure for trade execution.
• IAE — Technical Confluence Score (exit) — A multi-modal exit engine that detects trend exhaustion across 10 technical layers before price hits a hard stop.
• Point-Based Price Grid (risk) — Standardizes risk and position sizing based on fixed point intervals rather than dynamic volatility.
• Daily High Low MTF (volatility_filter) — Filters for breakout validity by ensuring the entry occurs beyond previous daily price extremes.

Known failure conditions

• ADX remains below 20 for more than 40 consecutive bars on the 4H timeframe, indicating a deep consolidation.
• Realized volatility drops below the ATR Compression Ratio threshold, leading to systematic whipsaws in the Donchian entry.
• IAE Confluence Score fails to exceed 60 during a confirmed price breakout, indicating weak underlying participation.

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