KNN-Fractal Volume Flow Breakout

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

Thesis

Market structure breakouts (fractals) represent shifts in supply/demand balance. These shifts are only tradable 'edges' when they are classified by a machine-learning regime (KNN) as having institutional volume profiles (RVOL) and significant velocity (CCI/MOM). By filtering for 'smart money' volume alignment, we avoid the noise of retail-driven false breakouts.

Components

• Volume SuperTrend AI (Expo) (regime) — Acts as the primary regime filter, using KNN to classify if current volume-price behavior matches historical trend-continuation profiles.
• Momentum (MOM) (direction) — Ensures that the price velocity is moving in the direction of the trade to avoid entering exhausted moves.
• Support and Resistance (Fractal-based) (entry) — Provides the concrete structural 'trigger' for entry; a break of a fractal high/low signals a shift in market structure.
• MACD (exit) — Used to identify momentum deceleration; the trade is closed when the MACD signal line is crossed, indicating a possible trend reversal.
• ATR Stop Loss Finder (risk) — Dynamically adjusts the stop loss based on recent volatility to prevent premature 'stop-outs' in choppy conditions.
• Commodity Channel Index (CCI) (confirmation) — Validates the strength of the breakout; price must show a statistical deviation from the mean (CCI > 100 or < -100) to confirm entry quality.
• Relative Volume (RVOL) (volatility_filter) — Filters out low-liquidity breakouts by ensuring current volume is significantly higher than the average for that specific time of day.

Known failure conditions

• Consistently hitting ATR stops during low-volatility 'drift' where RVOL remains high but price action is circular.
• KNN label oscillation (flipping between bullish/bearish) within a narrow range, indicating historical data does not match current regime.
• The asset exhibits significant 'gapping' behavior that invalidates the 5-bar fractal logic.

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