USD-Basket Structural Trend Follower

Family: trend_following · Regime: trending · Complexity: high · Asset classes: Forex (Major Pairs) · Timeframes: H1, H4

Thesis

Market movements are often 'random walks' unless driven by macro-economic flows, specifically centered around the US Dollar. By filtering for non-randomness (RWI) and aligning with the USD basket (USDX), we can enter trends with higher probability using smoothed momentum (OTLIB) and exit based on structural exhaustion (Boxline).

Components

• USDX (US Dollar Index) Candle Indicator (regime) — Acts as a macro-regime filter; we only trade in the direction of USD strength/weakness relative to its basket to ensure fundamental alignment.
• Ehlers SuperSmoother Filter (direction) — Identifies the immediate local trend direction with minimal lag, ensuring we are on the right side of the short-term price cycle.
• OTLIB Stochastic Oscillator (Heikin-Ashi based) (entry) — Uses HA-smoothed momentum to trigger entries, filtering out noise common in raw price stochastics.
• Stochastic Oscillator (exit) — Used to identify momentum exhaustion for exits, providing a mean-reversion counter-weight to the trend entry.
• Boxline (Dynamic Range Breakout) (risk) — Defines the 'current' volatility envelope; used for dynamic stop-loss placement at the box floor/ceiling.
• Random Walk Index (RWI BTF) (volatility_filter) — Filters out range-bound 'random walk' price action; ensures trades only occur when a non-random trend is statistically significant.

Known failure conditions

• Prolonged decoupling of individual currency pairs from the USDX basket movements.
• Excessive 'whipsawing' of Boxline levels during low-liquidity sessions leading to stop-outs.
• Systematic failure of the OTLIB Stochastic to return to neutral levels in high-volatility news events.

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