Wavelet-Darvas Structural Breakout

Family: breakout · Regime: trending · Complexity: high · Asset classes: Equities, Forex, Commodities · Timeframes: H1, H4

Thesis

Market breakouts are most reliable when they occur at the intersection of structural swing confirmation (ZigZag), low-frequency cycle alignment (DWT), and high-velocity price force (Average Force), suggesting that price is transitioning from a period of high-order noise to a lower-entropy directional trend.

Components

• Supported matrix.swap_columns Test (regime) — Acts as a computational gatekeeper; ensures the matrix-based data structure for tracking swing states is active and swapping correctly before logic executes.
• ZigZag Color (Classic) (direction) — Filters the primary trend direction by identifying significant price swings, ensuring entries align with the macro-structure.
• Darvas Boxes (Multi-Mode) (entry) — Provides the specific breakout trigger when price violates the ceiling/floor of a confirmed consolidation range.
• Pivot Points (Classic) (exit) — Provides objective, non-repainting horizontal targets for profit-taking based on floor-trader math.
• Daily High Low MTF (risk) — Defines the invalidation points for the trade; breaking the previous day's extreme suggests a total shift in intraday sentiment.
• Average Force (confirmation) — Confirms that the breakout is backed by momentum relative to the recent high-low range, filtering out low-velocity drifts.
• Discrete Wavelet Transform (DWT) (volatility_filter) — Denoises price action using Haar decomposition to ensure the underlying 'approximation' (trend) is moving in the direction of the trade.

Known failure conditions

• Price remains pinned between Daily Pivot (P) and R1/S1 for more than 3 sessions.
• Darvas Box height exceeds 3x the Average True Range (ATR), indicating a breakout from an over-extended range.
• ZigZag depth results in more than 5 repainted leg changes within 20 bars.

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