Recursive Channel Compression Breakout

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

Thesis

The hypothesis is that sustainable trends are preceded by a period of range compression (Inside Bar) that occurs after a structural expansion of a fixed volatility corridor (Constant Range Channel). By entering in the direction of a highly-smoothed recursive trend (RMAU), we filter out noise and capture the momentum of volatility expansion. This edge exists because market participants often overlook fixed-range breakouts during early-stage trend formation.

Components

• Constant Range Channel (regime) — Defines the volatility regime; a 'staircase' shift confirms a structural breakout beyond a fixed volatility threshold.
• Recursive Moving Average Unlimited (direction) — The multi-iterative smoothing acts as the primary trend filter to ensure entries align with the dominant momentum.
• Inside Bars (MTF Framework) (entry) — Identifies price compression. Entering on the breakout of an Inside Bar captures the transition from low to high volatility.
• Ichimoku Kinko Hyo (exit) — The Kijun-sen acts as a dynamic trailing stop and exit trigger, capturing the meat of the trend while exiting on momentum decay.
• Spread Display and Alert (risk) — Filters trades during periods of low liquidity or high volatility spikes where slippage would negate the edge.

Known failure conditions

• CRC remains flat for extended periods (ranging market) while RMAU provides whipsaw signals.
• Average spread exceeds the Mother Bar range, making the risk/reward ratio mathematically untenable.
• Inside Bars occur frequently without subsequent expansion, indicating a 'dead' market.

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