Recursive Tech-Proxy Mean Reversion

Family: trend_following · Regime: trending · Complexity: high · Asset classes: Equities, Equity Indices, Crypto · Timeframes: 4H, 1D

Thesis

Strong institutional trends are driven by sector-specific momentum (Tech) and characterized by price persistence that survives recursive smoothing; entries on volatility extremes (BB touches) within these trends offer favorable risk/reward ratios when protected by structural pivot levels (Darvas).

Components

• V6 All Features Fixture (regime) — Acts as a 'Market Proxy' regime filter by checking the aggregate momentum of tech giants (AAPL, MSFT, GOOGL) via cross-asset security calls.
• Recursive Moving Average Unlimited (direction) — Provides the core directional bias; the high iteration count filters out market noise to identify deeply established institutional trends.
• Bollinger Bands (entry) — Used to identify local mean-reversion opportunities (pullbacks) within the broader trend defined by the Recursive MA.
• SuperTrend (exit) — Provides a trailing volatility-based exit that allows the trend to develop while protecting against sharp trend reversals.
• Darvas Boxes Modern/Classic (risk) — Uses market structure (pivots) to define the hard stop-loss at the base of the current consolidation box and determines position sizing.

Known failure conditions

• A sustained period of high correlation between the tech proxies and the asset being traded followed by an abrupt decoupling.
• Extended periods of low-volatility 'drift' where price remains between BB Mid and Upper bands without touching the lower band.
• The Recursive MA 'overshoots' during a V-reversal, leading to entries at the peak of a dead-cat bounce.

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