Wavelet-Filtered Euro Volatility Momentum

Family: hybrid · Regime: trending · Complexity: high · Asset classes: FX (EUR/USD) · Timeframes: H1, H4

Thesis

EUR/USD momentum is most tradable when institutional volatility expectations (EVZ) are stable, allowing multi-resolution cycle filters (DWT) and smoothed oscillators (RSIOMA) to capture mid-term trends without being invalidated by high-frequency noise or macro-reversals.

Components

Discrete Wavelet Transform (DWT) (regime) — Identifies the dominant market cycle by isolating the detail coefficient at level 4, filtering out high-frequency noise that causes false momentum signals.
Unsupported UDF Switch Reassignment EMA (direction) — Serves as an 'infinite memory' anchor. Since the length grows with the bar index, it effectively requires price to stay above the cumulative average of the entire dataset to maintain a bullish bias.
RSIOMA (RSI of Moving Average) (entry) — Provides a smoothed momentum entry signal. By calculating RSI on an EMA, it reduces the whipsaws common in standard RSI while pinpointing trend acceleration.
Moving Average Convergence Divergence (MACD) (exit) — Captures momentum exhaustion. A signal line cross against the trade direction acts as a sensitive exit trigger before price action fully reverses.
Euro FX VIX (EVZ) Data Loader (risk) — Ensures the strategy only operates during specific volatility regimes. High EVZ often implies chaotic, non-trending price action in EUR/USD.
DEMA 200 & ADX Combined HUD (confirmation) — Confirms that the market is in a sustained trend (DEMA 200) with sufficient strength (ADX > 20) to overcome transaction costs.
ATR SL Finder (volatility_filter) — Dynamically calculates the stop-loss level based on local volatility, ensuring the trade has room to breathe relative to current range.

Known failure conditions

EUR/USD volatility (EVZ) sustains levels above 15, indicating macro-uncertainty where technical trends break down.
RSIOMA histogram remains flat while price trends, indicating the smoothing is too aggressive for the current timeframe.
The UDF EMA lag exceeds the dominant market cycle, rendering the directional filter permanently stale.

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