Editing Component:Signal Generation

= Signal Generation & Trade Management =

== Purpose ==

'''"Should we trade? Which direction? Where's entry/stop/target?"'''

This component is the decision maker. It receives graded setups from Layer 3 and decides:
# Should we take this trade? (passes all gate filters)
# Which direction? (LONG or SHORT based on MA21 slope)
# Where to enter, stop, and exit? (entry techniques)

----

== Trading Market Principle ==

'''"Trade with the trend, not against it. MA21 slope is your compass."'''

* MA21 rising = LONG only → don't fight a rising market
* MA21 declining = SHORT only → don't catch falling knives
* MA21 flat = use MTF direction as tiebreaker
* Gate filters protect capital → blocked hours, wrong zone, weak confirmation = skip
* Only high-quality setups traded → A+, A, B grades only

----

== Decision Flow ==

<pre>
           ┌─────────────────────────────────┐
           │  Setup Quality Result (Layer 3) │
           │  Grade: A+/A/B/C/D/F            │
           └─────────────────────────────────┘
                         │
                         ▼
           ┌─────────────────────────────────┐
           │  GATE 1: Grade Filter           │
           │  Only A+, A, B pass             │
           │  C, D, F → REJECTED             │
           └─────────────────────────────────┘
                         │
                         ▼
           ┌─────────────────────────────────┐
           │  GATE 2: Hour Filter            │
           │  Blocked: 9 AM, 10 PM, 11 PM    │
           │  (Loss-making hours)            │
           └─────────────────────────────────┘
                         │
                         ▼
           ┌─────────────────────────────────┐
           │  GATE 3: Direction Determination│
           │  MA21 rising → LONG             │
           │  MA21 declining → SHORT         │
           │  Flat/unclear → NO TRADE        │
           └─────────────────────────────────┘
                         │
                         ▼
           ┌─────────────────────────────────┐
           │  GATE 4: Probability Zone Filter│
           │  Top third + LONG = OK          │
           │  Bottom third + LONG = BLOCKED  │
           │  (Trades with probability)      │
           └─────────────────────────────────┘
                         │
                         ▼
           ┌─────────────────────────────────┐
           │  Calculate Entry/Stop/Target    │
           │  Generate Signal                │
           └─────────────────────────────────┘
</pre>

----

== Gate Filters ==

=== Gate 1: Grade Filter ===

Only high-quality setups are traded:

{| class="wikitable"
|-
! Grade !! Action
|-
| A+, A, B || PASS → Generate signal
|-
| C, D, F || BLOCKED → No signal generated
|}

=== Gate 2: Hour Filter ===

Block historically loss-making hours:

<pre>
Blocked Hours: [9, 22, 23]  // 9 AM, 10 PM, 11 PM IST

IF current_hour IN blocked_hours:
    RETURN None  // No signal
</pre>

=== Gate 3: Direction Determination ===

Direction is determined by MA21 slope:

<pre>
trend_direction = market_state.trend_direction

IF trend_direction == "up":
    direction = LONG    // MA21 rising → trade long

ELIF trend_direction == "down":
    direction = SHORT   // MA21 declining → trade short

ELSE:
    // MA21 flat/unclear → use MTF fallback
    IF mtf_direction == "up":
        direction = LONG
    ELIF mtf_direction == "down":
        direction = SHORT
    ELSE:
        RETURN None  // No clear direction → no trade
</pre>

=== Gate 4: Probability Zone Filter ===

Filters trades based on price position within range:

{| class="wikitable"
|-
! Zone !! LONG !! SHORT !! Logic
|-
| Top Third || Blocked || Allowed || 80% continuation down, 15% up
|-
| Middle Half || Allowed || Allowed || Neutral zone
|-
| Bottom Third || Allowed || Blocked || 80% continuation up, 15% down
|}

'''Sideways Market Exception:''' In creeper/consolidation, uses mean reversion (opposite logic).

----

== Stop Loss Calculation ==

Stop placement based on entry technique:

{| class="wikitable"
|-
! Entry Technique !! LONG Stop !! SHORT Stop
|-
| GREEN_BAR_PULLBACK || Below pullback low || Above rally high
|-
| BREAKOUT_PULLBACK || min(last 3 lows) || max(last 3 highs)
|-
| MA_BOUNCE || MA21 - 5 points || MA21 + 5 points
|-
| BOS_ENTRY || min(last 10 lows) + buffer || max(last 10 highs) - buffer
|-
| DISCOUNT_ZONE || entry × 0.99 || entry × 1.01
|-
| DEFAULT || entry - 40 points || entry + 40 points
|}

'''Minimum Stop Distance:''' 40 points (prevents tight stops hitting on noise)

----

== Take Profit Calculation ==

Implements "cut the move in half" principle:

<pre>
distance_to_ma = |entry_price - MA21|
target_distance = distance_to_ma × 0.5

IF LONG:
    take_profit = entry_price + target_distance
ELSE:
    take_profit = entry_price - target_distance
</pre>

'''Minimum R:R:''' 1.5 (target must be at least 1.5× risk)

----

== Cost Calculations ==

=== Commission (Dhan Broker) ===

<pre>
commission = position_size × Rs 20 per lot
</pre>

=== CTT (Commodity Transaction Tax) ===

<pre>
contract_value = entry_price × lot_size × position_size
tax = contract_value × 0.0001  // 0.01% total (0.005% per leg)
</pre>

----

== Configuration ==

{| class="wikitable"
|-
! Parameter !! Value !! Description
|-
| <code>commission_per_lot</code> || 20.00 || Rs per lot (Dhan)
|-
| <code>transaction_tax_rate</code> || 0.00005 || 0.005% per leg × 2 = 0.01% CTT
|-
| <code>lot_size_multiplier</code> || 100 || MCX lot size
|-
| <code>min_stop_distance</code> || 40 || Minimum stop in points
|-
| <code>default_risk_reward</code> || 1.5 || Minimum R:R ratio
|-
| <code>enable_hour_filter</code> || True || Block loss-making hours
|-
| <code>blocked_hours</code> || [9, 22, 23] || Hours to skip
|-
| <code>enable_ma_direction_filter</code> || True || MA21 alignment required
|-
| <code>enable_probability_zone_filter</code> || True || Zone probability check
|-
| <code>enable_color_change_filter</code> || False || Disabled (too restrictive)
|}

----

== Output ==

'''Signal Object:'''
{| class="wikitable"
|-
! Field !! Type !! Description
|-
| <code>direction</code> || Enum || LONG or SHORT
|-
| <code>entry_price</code> || float || Current close price
|-
| <code>stop_loss_price</code> || float || Calculated stop level
|-
| <code>take_profit_price</code> || float || Calculated target level
|-
| <code>position_size</code> || int || From setup quality (1 or 2 lots)
|-
| <code>setup_quality</code> || Enum || A+, A, or B
|-
| <code>entry_technique</code> || Enum || How stop was determined
|}

----

== Dependencies ==

'''Upstream:'''
* [[Component:Multi_Timeframe_Analysis|multi_timeframe_analysis.py]] - MTF direction fallback
* [[Component:Market_State_Analysis|market_state_analysis.py]] - Trend direction, market state
* [[Component:Setup_Quality_Detection|setup_quality_detection.py]] - Grade, position size

'''Internal:'''
* [[Component:Probability_Zone|probability_zone_analysis.py]] - Zone filtering logic

'''Downstream:'''
* [[Component:Trade_Execution|trade_execution_engine.py]] - Executes the signal

----

== Quick Reference ==

{| class="wikitable"
|-
! Scenario !! Result
|-
| Grade C, D, or F || No signal (rejected)
|-
| Hour = 9, 22, or 23 || No signal (blocked hour)
|-
| MA21 rising || LONG signal only
|-
| MA21 declining || SHORT signal only
|-
| MA21 flat, MTF unclear || No signal (no direction)
|-
| LONG in bottom third || Allowed (high prob)
|-
| LONG in top third || Blocked (low prob)
|-
| SHORT in top third || Allowed (high prob)
|-
| SHORT in bottom third || Blocked (low prob)
|}