Drift-Aligned Currency Basket Momentum

Family: trend_following · Regime: trending · Complexity: high · Asset classes: Forex (Majors and Minors) · Timeframes: H1, H4

Thesis

Institutional Forex trends are characterized by a 'drift' towards a specific currency that is consistent across its entire basket. By using a Zero Lag Least Squares Moving Average to filter price, we can enter these macro moves on short-term Stochastic pullbacks, provided that the Absolute Strength Histogram confirms momentum and the Asset Drift Model confirms the move is not random noise (VR > 1). The edge lies in the structural persistence of central bank-driven flows.

Components

Currency Strength Template (regime) — Filters for trades only where the base currency is exhibiting broad-based relative strength/weakness against a basket, ensuring the move is not pair-specific noise.
Zero Lag Least Squares Moving Average (ZLSMA) (direction) — Provides the immediate trend direction with zero-lag correction to avoid the late entry problems of standard EMAs.
Stochastic Oscillator (ta.stoch) (entry) — Identifies short-term mean-reversion entries (pullbacks) within the established higher-timeframe trend.
Parabolic SAR (Standard) (exit) — Acts as a trailing stop that accelerates towards price, locking in gains as the trend matures.
Asset Drift Model (ADM) (risk) — Quantifies the statistical persistence of the trend (Drift and Variance Ratio) to filter out non-stationary price action and determine position sizing.
Absolute Strength Histogram (ASH) (confirmation) — Confirms that bullish/bearish momentum is expanding (histogram growth) before committing to the entry.
GAS Price Levels (volatility_filter) — Ensures the trade is taken during a period of volatility expansion (Bollinger Band breakout) rather than low-liquidity drift.

Known failure conditions

The Asset Drift Model Variance Ratio (VR) drops below 1.0, indicating a transition to mean-reverting/noise-dominated behavior.
Currency Strength Template shows neutral readings (< 0.1) across the basket, indicating no institutional flow.
ZLSMA slope flattens, indicating a loss of linear regression momentum.

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