Session-Relative Volatility Exhaustion Strategy

Family: mean_reversion · Regime: high_vol · Complexity: high · Asset classes: Forex (Majors), Liquid Equities · Timeframes: M15, H1

Thesis

Markets exhibit volatility-driven 'stretch' away from their 200-period mean. When price exceeds its 2-standard deviation band during a specific trading session and momentum begins to rotate (as shown by ROC and the ADX 'inverse' cross), a mean-reversion move is likely. Using session extremes provides a structural anchor for risk that dynamic indicators lack.

Components

• Bollinger Bands (regime) — Defines the volatility regime; price must be outside the bands to ensure sufficient expansion for a mean-reversion or trend-break attempt.
• Rate of Change (by PK) (direction) — Measures the velocity of the price move to ensure the counter-move or trend continuation has sufficient momentum.
• ADX Crossing INGM (entry) — Uses the specific 'logical inversion' signal where +DI crossing below -DI triggers a Buy, essentially catching a volatility-based 'exhaustion' snap-back.
• ATR Heiken Ashi (exit) — Used as a trailing exit to filter out noise while capturing the majority of a trend movement.
• Session Range (High/Low/Mid) (risk) — Defines stop-loss levels based on the session's physical high/low to respect structural market boundaries.
• Stochastic Oscillator (confirmation) — Confirms entry by ensuring the market is transitioning from an extreme overbought/oversold state.
• SMA3x5+BB - pjdhiro (volatility_filter) — Serves as a volatility filter by requiring price to be significantly displaced from the 200 SMA (Set A) to avoid low-volatility congestion.

Known failure conditions

• Price enters a 'walking the bands' regime where ROC remains flat while ADX signals flicker.
• Session range is excessively wide (e.g., > 2% of asset value), making stop-losses mathematically untenable.
• The 'Logical Inversion' of the ADX component fails to capture reversals and instead traps the strategy in dying trends.

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