Wavelet-JB Non-Normal Trend Hunter

Family: trend_following · Regime: trending · Complexity: high · Asset classes: FX, Equities, Crypto · Timeframes: H1, H4, D1

Thesis

Market trends are most profitable when price action exhibits 'fat-tail' behavior (measured by Jarque-Bera) and institutional volume accumulation (Float Trader). By using Wavelet decomposition to strip noise and Ehlers smoothing for zero-lag confirmation, we can enter these momentum bursts at their inception. The core edge lies in the structural transition from a normally distributed 'random walk' to a non-normal trending state.

Components

Total Power Indicator (regime) — Acts as the regime filter, ensuring that the trend has sufficient 'dominance' by comparing the percentage of bull vs bear bars.
Discrete Wavelet Transform (DWT) (direction) — Provides the primary directional bias by decomposing price to remove noise; a 'close > DWT approximation' signal confirms the macro trend.
Float Trader Indicator (entry) — Triggers entries based on volume-weighted price levels; specifically, an entry is validated when price breaks the cumulative volume-weighted high/low.
RSI Area (Histogram) (exit) — Used for tactical profit taking when momentum enters extreme overbought/oversold territory and begins to revert.
Darvas Boxes Modern/Classic (risk) — Defines the structural risk boundaries; stop losses are placed at box extremes, and position size is normalized by box height.
Ehlers Ultimate Smoother Filter (USF) (confirmation) — Provides zero-lag confirmation of the immediate trend direction to avoid entering against short-term pullbacks.
Jarque-Bera Test (JB) (volatility_filter) — Ensures volatility is present and the market is in a 'fat-tail' (non-normal) state, which is necessary for trend-following strategies to succeed.

Known failure conditions

The strategy fails if Jarque-Bera remains below 6.0 for extended periods, indicating a perfectly Gaussian/efficient market with no trendable fat tails.
The strategy fails if Total Power Indicator oscillates near 0, indicating a complete absence of dominance from either side.

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).