Schaff-Ehlers Pulse Expansion Strategy
Family: hybrid · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Crypto · Timeframes: H1, H4
Thesis
Market trends are not linear but consist of momentum 'pulses' that can be isolated using price velocity filters (REI) and cyclical oscillators (STC). Because prices tend to overextend and then revert to a mean cycle, using Ehlers' Detrended Synthetic Price allows us to exit when the specific cyclical energy of a move is exhausted, regardless of the macro trend, thereby capturing the 'meat' of the move while minimizing drawdowns from deep pullbacks.
Components
- Range Expansion Index (REI) (regime) — Acts as the primary regime filter; its unique logic zeros out values in non-trending or noisy markets, ensuring the strategy only executes when price velocity is significant.
- Traders Dynamic Index (TDI) (direction) — Provides the macro-directional bias by requiring the RSI Price Line to be above the Market Base Line and Signal Line, ensuring the cycle trade is aligned with volatility-adjusted momentum.
- Schaff Trend Cycle (STC) (entry) — Identifies the specific cyclical entry point by detecting the early turn in the double-smoothed MACD-Stochastic hybrid.
- Ehlers Detrended Synthetic Price (DSP) (exit) — Detects the exhaustion of the price cycle component. By removing the trend, it signals when the specific momentum pulse that triggered the entry has mean-reverted.
- Extrem SuperTrend (risk) — Provides a volatility-based trailing stop and initial risk anchor. Position sizing is calculated based on the distance between price and the SuperTrend line.
Known failure conditions
- Asset price action exhibits 'random walk' behavior with no detectable cycles in the DSP/STC periods.
- Prolonged low-volatility periods where REI remains at zero, leading to opportunity cost and 'stale' signals.
- High-frequency news events causing ATR spikes that prematurely trigger SuperTrend stops before the DSP cycle completes.
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