TLB Daily Range Expansion Alpha
Family: breakout · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Indices · Timeframes: H1, H4
Thesis
Market participants cluster orders around daily extremes. A breakout of the previous day's range, when confirmed by a 'Three-Line Break' structural shift and bullish/bearish smoothed momentum (Heiken Ashi), indicates a high-probability volatility expansion phase. The edge lies in filtering 'false' breakouts using the Inside Bar compression check and an adaptive KAMA exit that accounts for the decreasing efficiency of the move as it matures.
Components
- Three-Line Break (TLB) with MA (regime) — Used to establish the primary market regime, ensuring we only trade in the direction of significant structural shifts that have surpassed 3 previous price levels.
- Heiken Ashi (Standard MT5) (direction) — Provides a smoothed directional filter to ensure that the immediate momentum is aligned with the TLB regime, reducing noise from minor retracements.
- Daily High Low MTF (entry) — Acts as the liquidity trigger; entries only occur when price breaks the prior day's absolute range, signifying a trend expansion.
- MultiKAMA (TyphooN) (exit) — An adaptive trend-following exit that tightens during high-efficiency moves and widens during noise, allowing for volatility-adjusted profit taking.
- ATR Projection (risk) — Provides a non-arbitrary, volatility-based floor for risk (Stop Loss) and a ceiling for initial target projections.
- Inside Bars (MTF Framework) (volatility_filter) — Serves as a volatility filter to ensure we are not entering during a 'wait-and-see' compression phase; entries are blocked if the market is currently consolidating within an Inside Bar.
Known failure conditions
- Strategy fails in 'choppy' sideways regimes where price oscillates around the previous day's high/low without extension.
- Invalidated if the TLB 'LinesToBreak' setting is too low (e.g., 1), leading to over-sensitivity to noise.
- Failure occurs when daily ranges are extremely narrow, causing the ATR-based stop to be hit by spread alone.
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