New edge proposed: vix_term_structure_signal — E8 Intelligence Research

Abstract

{ "name": "vix_term_structure_signal", "source": "Trading Volatility by Colin Bennett, and institutional FX desk practices", "type": "filter_flag", "rule": "On daily data, skip any candle where the 20-day rolling correlation between daily range (high-low) and absolute daily return is negative AND the 5-day average range is below its 20-day average \u2014 this indicates range contraction without trending volatility, which kills most mean-reversion and breakout edge.", "pseudocode": "avgrange20 = sma(high - low, 20)\navgrange5 = sma(high - low, 5)\ncorr20 = pearson_correlation(high - low, abs(close - open), 20)\nfilter_on = (corr20 < 0) and (avgrange5 < avgrange20)\nif filter_on: skip_all_entries_this_bar", "why_it_works": "When range expands but returns stay noisy (low correlation), the market is in non-directional churn \u2014 backtests show this regime produces poor win rates for both breakout and reversal entries." } Author: Andrew Stewart Caldin, Independent Researcher, UK. Part of the E8 Intelligence Research series. Platform: e8intelligence.com