FVG-GARCH Imbalance Trend Follower

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

Thesis

Market imbalances (Fair Value Gaps) represent price inefficiency. When these gaps appear in alignment with long-term trends and positive institutional money flow, they act as high-probability breakout points. By scaling position sizes inversely to conditional volatility (GARCH), the strategy avoids over-exposure during periods of systemic risk (volatility clustering).

Components

• UDT Array Push Identity Test (regime) — Used as a 'Logic Integrity Gate'. In this strategy context, it serves as a pre-execution check to ensure the UDT handling for multidimensional FVG data is valid before processing orders.
• Chaikin Money Flow (NNFX Version) (direction) — Determines the quality of the trend by ensuring price movement is backed by volume-weighted momentum.
• Fair Value Gap (FVG) Indicator (entry) — Identifies price imbalances (liquidity voids) that act as the primary catalyst for entry.
• Average True Range (ATR) (exit) — Provides a volatility-adjusted exit mechanism (trailing stop) to capture trend extensions.
• Conditional Volatility (CV) (risk) — Scales position size based on annualized volatility clustering, reducing exposure during high-risk GARCH-forecasted regimes.
• MACD (confirmation) — Provides momentum confirmation to filter out 'dead' FVG zones that are likely to be ignored by price.
• 200-Day Trend Background (Smoothed Volume Gradient) (volatility_filter) — Filters out low-volatility ranging environments and aligns the strategy with the major higher-timeframe trend.

Known failure conditions

• Price consistently ignores FVGs (filling them instantly and reversing), indicating the 'liquidity void' hypothesis is invalid for the current asset.
• GARCH volatility forecasts (CV) stay at extremes, leading to zero position sizes or excessive risk.
• HTF 200 SMA slope remains within the neutral zone for >60% of the backtest duration.

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).