USDX-VWAP Cyclic Momentum Strategy

Family: trend_following · Regime: trending · Complexity: medium · Asset classes: FX (Majors) · Timeframes: M15, H1

Thesis

Currency pairs are tethered to the global movement of the US Dollar; by using the USDX as a regime filter, we isolate periods of genuine dollar-driven trends. Because intraday markets return to volume-weighted means (VWAP), entering during stochastic pullbacks in the direction of the global dollar index and the local VWAP bias captures high-probability trend continuations. The Ehlers CG provides a mathematical exit strategy based on signal balance rather than price lag, theoretically exiting before trend exhaustion.

Components

USDX (US Dollar Index) Candle Indicator (regime) — Determines the broader USD regime; ensures currency-specific trades align with global dollar strength.
Daily Volume-Weighted Average Price (VWAP) (direction) — Identifies the intraday institutional bias; trades are only taken in the direction of the volume-weighted mean.
Stochastic Oscillator (entry) — Captures local mean-reversion entries when the price is temporarily oversold/overbought within the trend.
Ehlers Center of Gravity (CG) (exit) — Signals trade culmination by identifying the balance point of the immediate price cycle, capturing the exit before the reversal.
Williams Fractals (risk) — Provides objective structural swing levels for stop-loss placement and trailing.
Total Power Indicator (confirmation) — Confirms that the dominant market participant (Bull/Bear) has an active momentum advantage.

Known failure conditions

USDX gaps or data synchronization errors creating 'phantom' trend signals.
Persistent low-volatility environments where price hugs VWAP, causing Stochastic whipsaws.
Total Power Indicator remaining saturated at 100 during parabolic moves, leading to missed exits.

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