PVR-PAM Volatility Compression Breakout

Family: breakout · Regime: low_vol · Complexity: medium · Asset classes: Forex, Indices, Equities · Timeframes: M15, H1

Thesis

High-probability price moves are preceded by periods of low volatility (compression) and must be confirmed by an expansion in volume (effort vs. result). By entering only when ATR is low and Price Volume Rank indicates active accumulation/distribution, we capture the initiation of a new trend while CCI ensures the momentum is sufficient to sustain the move through a fixed-time horizon.

Components

• Price Volume Rank (PVR) (regime) — Provides the regime filter by ensuring entries only occur during 'Active Accumulation' (Quadrant 1) or 'Active Distribution' (Quadrant 4) where volume confirms price direction.
• Accumulation/Distribution (A/D) (direction) — Acts as a directional filter by identifying whether the underlying money flow supports the current price move via divergence analysis.
• PAM (Price Action Master) - Volatility Filter Version (entry) — Identifies 'volatility coils' where the market is quiet, setting the stage for a high-momentum breakout.
• Volume Price Confirmation Indicator (VPCI) (exit) — Captures the exhaustion of volume-price trends to trigger an exit before a full reversal occurs.
• Legacy Trading Connector (OptionX) (risk) — Standardizes execution via a signal-to-connector bridge, enforcing a fixed-time-horizon risk model (expiration-based).
• Commodity Channel Index (CCI) (confirmation) — Confirms that the breakout from the low-volatility state has sufficient cyclical momentum to cross the zero-line.

Known failure conditions

• Price trends consistently on declining volume (Quadrant 2/3), preventing the PVR filter from ever triggering.
• The asset's base volatility is structurally higher than the static Value_B threshold (e.g., Gold), leading to zero trades.
• A/D line stays flat while price trends, indicating the move is driven by price gaps rather than intra-bar volume flow.

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