GARCH-CG Cyclic Momentum Strategy

Family: hybrid · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Commodities · Timeframes: H1, H4, D1

Thesis

The strategy assumes that market efficiency varies based on volatility clustering (GARCH); by entering only when conditional volatility is stable and momentum (REI) aligns with the 'true' cumulative swing direction (ASI), we can exploit Ehlers' cycles (CG) with a higher probability of success. The Sunday Gap acts as a circuit breaker for extreme emotional imbalances.

Components

• Conditional Volatility (CV) (regime) — Filters out periods of extreme volatility clustering where GARCH(1,1) predicts risk levels that exceed technical signal reliability.
• Accumulation Swing Index (ASI) (direction) — Provides the 'true' cumulative trend direction, ensuring trades align with the long-term price action structure rather than local noise.
• Ehlers Center of Gravity (CG) (entry) — Identifies the balance point of the current cycle to pinpoint low-lag turning points for entry.
• Heiken Ashi (Standard MT5) (exit) — Smoothing price action for trend-following exits, preventing premature exits on minor counter-trend wicks.
• ATR SL Finder (risk) — Provides a volatility-adjusted floor (for longs) or ceiling (for shorts) to manage risk dynamically.
• Range Expansion Index (REI) (confirmation) — DeMark-style momentum filter that ensures the market is not in a 'stale' or noise-heavy range before entering.
• Sunday Opening Gap (volatility_filter) — Acts as a structural filter; excessive gaps represent emotional exhaustion that can lead to indicator failure early in the week.

Known failure conditions

• GARCH volatility remains persistently high (Beta > 0.9), leading to no-trade regimes for extended periods.
• The 'Limit Move' parameter T in ASI is set incorrectly for the asset, causing the index to flatline.
• The market enters a strong linear trend without cycles, causing the CG indicator to whipsaw continuously.

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).