Gaussian-Pivot Mean Reversion Breakout

Family: hybrid · Regime: trending · Complexity: medium · Asset classes: Forex, Equity Indices, High-Liquidity Large Caps · Timeframes: 15m, 1h

Thesis

Markets exhibit 'memory' at daily pivot levels while being driven by Gaussian-smoothed trends. By identifying a breakout of a pivot level (R1/S1) that aligns with a low-lag ALMA trend, we enter high-probability momentum bursts. These moves are expected to eventually revert to the session's 'fair value' (VWAP), providing a logical, volume-based exit point. Volatility (ATR) acts as the filter to ensure we only trade when the risk-to-reward ratio is supported by current market expansion.

Components

• Arnaud Legoux Moving Average (ALMA) (regime) — Acts as a noise-filtered trend filter; its Gaussian distribution allows for smoother trend identification without the typical lag of EMAs, ensuring we only trade in the direction of the underlying momentum.
• Unsupported table.new modes Test Indicator (direction) — Functionally provides raw price action (close); used to confirm that the current price candle has not deviated excessively from the regime before entry.
• Pivot Points (Classic) (entry) — Provides static intraday liquidity levels. Entering on an R1 breakout or S1 bounce utilizes institutional floor-trading levels as catalysts.
• Daily Volume-Weighted Average Price (VWAP) (exit) — Serves as the 'fair value' anchor for the session. In a trending regime, price often reverts to or finds friction at the volume-weighted mean.
• Average True Range (NNFX) (risk) — Used for volatility-adjusted stop losses and position sizing, ensuring the strategy breathes during high-volatility sessions.

Known failure conditions

• Price oscillating across the ALMA line frequently (choppy market).
• Pivot levels R1/S1 being ignored consistently (low liquidity or high-impact news).
• ATR values dropping below spread/commission costs, rendering the risk/reward profile non-viable.

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