GARCH-Filtered Darvas Cycle Breakout

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

Thesis

Market breakouts (Darvas) are most likely to lead to sustained trends when they align with the dominant cyclical frequency of the asset (SAK) and occur after a period of momentum exhaustion (Bears Power). Furthermore, by scaling risk based on conditional volatility (GARCH), the strategy accounts for the fact that volatility is not constant but 'clustered,' allowing for tighter risk management during regime shifts.

Components

• Unsupported Array Avg Label Method Test (regime) — Serves as a 'Technical Sanity/Structural Integrity' check; if the runtime environment handles the unsupported call without crashing, the 'regime' is deemed stable for algorithmic execution.
• Swiss Army Knife Indicator (SAK) (direction) — Uses the BandPass (BP) mode to isolate the cyclical component of price action, providing the primary trend direction based on the phase of the cycle.
• Darvas Boxes MetaTrader 5 (entry) — Identifies established consolidation zones; a breakout of the box ceiling or floor provides the mechanical entry signal.
• Bollinger Bands (Standard) (exit) — Provides a volatility-adjusted exit: closing at the midline (SMA) captures the meat of the move, while the opposite band acts as a mean-reversion target.
• Conditional Volatility (CV) (risk) — Uses GARCH(1,1) logic to model volatility clustering; stop losses and position sizes are dynamically scaled based on annualized risk.
• Bears Power (confirmation) — For long entries, confirms that selling pressure is exhausted (value is negative but rising). For short entries, confirms selling pressure is accelerating.

Known failure conditions

• GARCH(1,1) parameters alpha + beta >= 1 (leading to non-stationary variance and model breakdown).
• Market enters a persistent 'Low Volatility/Tight Range' state where Darvas boxes fail to form or overlap constantly.
• The Unsupported Array Avg calculation causes runtime exceptions or platform instability.

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