Wavelet-Bandpass Trend Pulse

Family: hybrid · Regime: trending · Complexity: high · Asset classes: FX, Equities, Crypto · Timeframes: H1, H4

Thesis

Market trends are not linear but composed of cyclical pulses. By using a Discrete Wavelet Transform to isolate signal energy and a Bandpass Filter to time the entry of these pulses, we can enter a trend at the moment of maximum cyclical momentum, provided transaction costs (spread) do not exceed the signal's expected amplitude.

Components

• Bill Williams Alligator (regime) — Acts as the primary regime filter to ensure the market is in an 'active' state (lines fanned out) rather than 'sleeping' (lines intertwined).
• MultiKAMA (TyphooN) (direction) — Provides the directional bias. Its adaptive nature filters out minor price noise while responding to true trend shifts faster than static averages.
• Bandpass Filter (BPF) (entry) — Isolates cyclical momentum within a specific frequency band, providing precise entry triggers when the cycle aligns with the trend.
• Average True Range (ATR) (exit) — Used to calculate volatility-adjusted stop losses and take profit targets to ensure exits are proportional to current market range.
• Spread Display and Alert (risk) — Serves as a hard cost-filter; entries are blocked if the bid-ask spread exceeds a percentage of the ATR, preventing cost-erosion.
• Discrete Wavelet Transform (DWT) (volatility_filter) — Used as a volatility/noise filter. It decomposes the price to ensure the signal-to-noise ratio is high enough (energy in the detail coefficients) to trade.

Known failure conditions

• The market enters a prolonged 'sawtooth' regime where volatility is high but net displacement is zero.
• Realized spreads during high-impact news events consistently exceed the ATR-based profit targets.
• The dominant market cycle shifts outside of the 10-20 period Bandpass window, causing the BPF to lead or lag significantly.

Explore the full interactive blueprint with parameter ranges and evidence on WOBR StrategyVerse, or generate this strategy as an MT4/MT5 Expert Advisor with QuantMogul AI Engine (free download).