Editing Alpha Research5 (section)

= Multi-Timeframe Trading Strategy System =
'''Version:''' 2.0 | '''Last Updated:''' 2026-01-12 | '''Status:''' Production

== Executive Summary ==

This document describes a systematic, rule-based crude oil futures trading strategy implemented as a multi-component backtesting system. The strategy uses '''multi-timeframe alignment''' (5M to Daily), '''market state analysis''', '''setup quality grading''', and '''institutional-grade signal generation''' to identify high-probability trade setups.

{| class="wikitable" style="width:100%"
|+ '''System Statistics (Latest Backtest)'''
|-
! Metric !! Value !! Notes
|-
| Total Trades || 1,829 || 7-month period (Jun 2025 - Dec 2025)
|-
| Win Rate || 55.1% || Above random chance
|-
| Avg Holding Period || 2.8 hours || Intraday focus
|-
| Primary Direction || 85% Short || Trend-following bias
|-
| Exit Types || Stop: 80%, Target: 17%, Timeout: 4% || Stop-based risk management
|}

----

== System Architecture Overview ==

<pre>
                          +------------------------------------------+
                          |          DATA LAYER                      |
                          |  +---------+ +---------+ +---------+     |
                          |  | 1-Min   | | 5-Min   | | 15-Min  |     |
                          |  | OHLCV   | | OHLCV   | | OHLCV   |     |
                          |  +---------+ +---------+ +---------+     |
                          |  +---------+ +---------+ +---------+     |
                          |  | 1-Hour  | | 4-Hour  | | Daily   |     |
                          |  | OHLCV   | | OHLCV   | | OHLCV   |     |
                          |  +---------+ +---------+ +---------+     |
                          +---------------------|--------------------+
                                                |
                                                v
+-------------------------------------------------------------------------------------------+
|                              PIPELINE ENGINE (Orchestrator)                                |
|                                                                                           |
|   +---------------+    +---------------+    +---------------+    +---------------+        |
|   | LAYER 1       |    | LAYER 2       |    | LAYER 3       |    | LAYER 4       |        |
|   | Trend         |--->| Market State  |--->| Setup Quality |--->| Signal        |        |
|   | Analysis      |    | Analysis      |    | Detection     |    | Generation    |        |
|   +---------------+    +---------------+    +---------------+    +---------------+        |
|          |                    |                    |                    |                 |
|          v                    v                    v                    v                 |
|   [MA21, MA200]        [range_bound]         [A+/A/B/C/D/F]      [Entry/Stop/TP]         |
|   [Trend Direction]    [creeper_move]        [Score 0-100]       [Direction]             |
|   [Trend Phase]        [narrow_volume]       [Risk %]            [Position Size]         |
|                                                                                           |
|                                          |                                                |
|                                          v                                                |
|                               +-------------------+                                       |
|                               | LAYER 5           |                                       |
|                               | Trade Execution   |                                       |
|                               | Engine            |                                       |
|                               +-------------------+                                       |
|                                          |                                                |
|                                          v                                                |
|                               [Open/Manage/Close Trades]                                  |
|                               [P&L Calculation]                                           |
|                               [Cost Accounting]                                           |
+-------------------------------------------------------------------------------------------+
                                          |
                                          v
                          +------------------------------------------+
                          |          OUTPUT LAYER                    |
                          |  +------------------+  +---------------+ |
                          |  | Trade-Level CSV  |  | Summary JSON  | |
                          |  | (All trades)     |  | (Metrics)     | |
                          |  +------------------+  +---------------+ |
                          +------------------------------------------+
</pre>

----

== Component Details ==

=== Layer 1: Multi-Timeframe Trend Analysis ===

'''Purpose:''' Analyze trend direction and strength across 5 timeframes

'''File:''' <code>src/components/multi_timeframe_analysis.py</code>, <code>src/components/trend_analysis_core.py</code>

'''Timeframes Analyzed:'''
{| class="wikitable"
|-
! Timeframe !! Weight !! Purpose
|-
| Daily (1D) || 30% || Context (overall trend)
|-
| 4-Hour (4H) || 25% || Primary trend
|-
| 1-Hour (1H) || 20% || Confirmation
|-
| 15-Min (15M) || 15% || Fine-tuning
|-
| 5-Min (5M) || 10% || Entry timing
|}

'''Key Calculations:'''
<pre>
Alignment Score = SUM(Weight[tf] * Direction_Match[tf]) for all tf

Where:
- Direction_Match = 1 if tf direction matches dominant direction, else 0
- Dominant direction = direction with highest weighted votes

MA Analysis per Timeframe:
- MA21 (fast) - Short-term trend
- MA200 (slow) - Long-term trend
- Price position relative to MAs
- MA slope (trending vs flat)
</pre>

'''Output:''' <code>TimeframeAnalysisResult</code>
* <code>final_direction</code>: LONG / SHORT / NEUTRAL
* <code>alignment_score</code>: 0.0 - 1.0
* <code>timeframe_results</code>: Per-timeframe analysis dictionary

----

=== Layer 2: Market State Analysis ===

'''Purpose:''' Classify current market conditions into actionable states

'''File:''' <code>src/components/market_state_analysis.py</code>

'''Market States:'''
<pre>
+-------------------+--------------------------------+------------------+
| Market State      | Characteristics                | Trading Action   |
+-------------------+--------------------------------+------------------+
| range_bound       | Price oscillating, no clear    | Trade reversals  |
|                   | trend, MA21 relatively flat    | at range edges   |
+-------------------+--------------------------------+------------------+
| creeper_move      | Slow, grinding trend with      | Trade WITH trend |
|                   | small candles, steady MA21     | on pullbacks     |
+-------------------+--------------------------------+------------------+
| narrow_low_volume | Tight range, reduced volume,   | CAUTION - await  |
|                   | consolidation pattern          | breakout         |
+-------------------+--------------------------------+------------------+
| trending          | Strong directional move,       | Trade WITH trend |
|                   | clear MA separation            | aggressively     |
+-------------------+--------------------------------+------------------+
</pre>

'''Detection Algorithm:'''
<pre>
1. Calculate recent volatility (ATR or range)
2. Calculate MA21 slope
3. Calculate volume relative to average
4. Apply classification rules:

IF slope < threshold AND range tight THEN narrow_low_volume
ELIF slope small AND trend present THEN creeper_move
ELIF volatility high AND no trend THEN range_bound
ELIF strong directional move THEN trending
</pre>

'''Output:''' <code>MarketStateResult</code>
* <code>market_state</code>: Enum value
* <code>volatility_metrics</code>: ATR, range data
* <code>trend_phase</code>: early/middle/late/exhaustion

----

=== Layer 3: Setup Quality Detection ===

'''Purpose:''' Score and grade trade setups using 5-factor weighted system

'''File:''' <code>src/components/setup_quality_detection.py</code>

'''5-Factor Scoring System:'''
<pre>
+-------------------------+--------+------------------------------------------+
| Factor                  | Weight | Description                              |
+-------------------------+--------+------------------------------------------+
| Timeframe Alignment     | 30%    | How many timeframes agree on direction   |
| Trend Strength          | 20%    | MA slope, price momentum                 |
| Entry Quality           | 15%    | Clean candle, near MA, not extended      |
| Key Level Proximity     | 20%    | Near support/resistance levels           |
| Risk/Reward Ratio       | 15%    | Potential reward vs risk                 |
+-------------------------+--------+------------------------------------------+
                           = 100%
</pre>

'''Grade Classification:'''
<pre>
Score >= 90  -->  A+ Grade  (Best setups, full position)
Score >= 80  -->  A Grade   (Excellent, 80% position)
Score >= 70  -->  B Grade   (Good, 60% position)
Score >= 60  -->  C Grade   (Average, 40% position)
Score >= 50  -->  D Grade   (Below average, 20% position)
Score <  50  -->  F Grade   (Poor, NO TRADE)
</pre>

'''Penalty System:'''
<pre>
Penalties Applied:
- Creeper Move detected: -50 points
- MA Struggle (price fighting MA): -30 points
- Missing Two-Day Trend: -30 points
- Phase Mismatch: -25 points
- Far from Key Level: -50 points
- Far from MA: -40 points

Bonuses Applied:
+ Railroad Trend (strong alignment): +15 points
+ At Key Level: +10 points
+ Clean Entry Candle: +10 points
</pre>

'''Institutional Fight Detection:'''
<pre>
IF 4H direction != Daily direction THEN
    Apply 0.7x multiplier to final score
    (Institutions may be fighting retail)
</pre>

'''Output:''' <code>SetupQualityResult</code>
* <code>grade</code>: A+ / A / B / C / D / F
* <code>score</code>: 0 - 100
* <code>factor_scores</code>: Individual factor breakdown
* <code>position_size</code>: Recommended lots
* <code>risk_percent</code>: Account risk percentage
* <code>can_auto_trade</code>: Boolean

----

=== Layer 4: Signal Generation & Trade Management ===

'''Purpose:''' Generate precise entry/exit signals with risk parameters

'''File:''' <code>src/components/signal_generation_trade_management.py</code>

'''Signal Generation Flow:'''
<pre>
                    +------------------+
                    | Setup Quality    |
                    | Grade >= B       |
                    +--------+---------+
                             |
                             v
                    +------------------+
                    | Direction Check  |
                    | MTF Aligned?     |
                    +--------+---------+
                             |
              +--------------+--------------+
              |                             |
              v                             v
     +--------+--------+           +--------+--------+
     | FILTERS         |           | GENERATE        |
     | Hour filter     |           | Entry price     |
     | Prob zone       |           | Stop loss       |
     | MA direction    |           | Take profit     |
     +--------+--------+           | Position size   |
              |                    +-----------------+
              v
     +------------------+
     | BLOCKED or       |
     | PASSED           |
     +------------------+
</pre>

'''Entry Techniques (17 Types):'''
<pre>
1. near_ma          - Entry near 21 MA
2. ma_bounce        - Bounce off 21 MA
3. break_of_structure (BOS) - Breakout entry
4. pullback_entry   - Trend pullback
5. key_level_entry  - At support/resistance
... (12 more specialized techniques)
</pre>

'''Stop Loss Calculation:'''
<pre>
LONG Stop = Entry Price - MAX(recent_low - buffer, min_stop_distance)
SHORT Stop = Entry Price + MAX(recent_high + buffer, min_stop_distance)

Where:
- min_stop_distance = 40 points (prevents too-tight stops)
- buffer = 5 points for BOS entries
- recent lookback = 5-10 bars depending on technique
</pre>

'''Take Profit Methods:'''
<pre>
1. Fixed R:R    - TP = Entry + (Stop_Distance * Risk_Reward_Ratio)
2. Fixed Points - TP = Entry +/- default_profit_points
3. ATR Multiple - TP = Entry +/- (ATR * atr_multiple)
</pre>

'''Active Filters:'''
{| class="wikitable"
|-
! Filter !! Purpose !! Impact
|-
| Hour Filter || Block toxic hours (9, 22, 23) || Saves Rs 357k+
|-
| MA Direction || Trade only with MA21 slope || Improves trend alignment
|-
| Probability Zone || Block counter-trend in extremes || Reduces false signals
|}

'''Output:''' <code>Signal</code>
* <code>signal_id</code>: Unique identifier
* <code>direction</code>: LONG / SHORT
* <code>entry_price</code>: Precise entry level
* <code>stop_loss_price</code>: Risk cutoff
* <code>take_profit_price</code>: Target level
* <code>position_size</code>: Lots to trade
* <code>setup_quality</code>: Grade
* <code>estimated_costs</code>: Brokerage + taxes

----

=== Layer 5: Trade Execution Engine ===

'''Purpose:''' Execute signals, manage open positions, calculate P&L

'''File:''' <code>src/components/trade_execution_engine.py</code>

'''Trade Lifecycle:'''
<pre>
SIGNAL RECEIVED
      |
      v
+-----+-----+
| Validate  |
| Signal    |
+-----+-----+
      |
      v
+-----+-----+      +-----------+
| Check     |----->| REJECT    |
| Filters   |  NO  | Signal    |
+-----+-----+      +-----------+
      | YES
      v
+-----+-----+
| OPEN      |
| Position  |
+-----+-----+
      |
      v
+-----+-----+
| Monitor   |<----+
| Each Bar  |     |
+-----+-----+     |
      |           |
      v           |
+-----+-----+     |
| Check     |     |
| Exit      |     |
| Conditions|-----+
+-----+-----+  NO HIT
      | HIT
      v
+-----+-----+
| CLOSE     |
| Trade     |
+-----+-----+
      |
      v
+-----+-----+
| Calculate |
| P&L       |
+-----+-----+
</pre>

'''Exit Conditions:'''
<pre>
1. STOP HIT    - Price touches stop_loss_price
2. TARGET HIT  - Price touches take_profit_price
3. TIMEOUT     - Max holding period reached
4. EOD         - End of day force close
</pre>

'''P&L Calculation:'''
<pre>
For LONG:
  Gross P&L = (Exit_Price - Entry_Price) * Position_Size * Lot_Multiplier

For SHORT:
  Gross P&L = (Entry_Price - Exit_Price) * Position_Size * Lot_Multiplier

Net P&L = Gross P&L - Commission - Taxes

Where:
  Commission = Position_Size * Rs 20 per leg * 2 (entry + exit)
  Taxes (CTT) = Contract_Value * 0.01% (sell side)
  Lot_Multiplier = 100 (MCX Crude Oil)
</pre>

----

== Data Flow Diagram ==

<pre>
                          RAW 1-MIN DATA
                               |
                               v
                    +--------------------+
                    | Timeframe          |
                    | Conversion         |
                    | (1m->5m,15m,1h,4h,1d)
                    +--------------------+
                               |
                               v
+------------------+   +------------------+   +------------------+
| 5-Min Candles    |   | 15-Min Candles   |   | Higher TFs       |
| with MA21, MA200 |   | with MAs         |   | (1H, 4H, Daily)  |
+--------+---------+   +--------+---------+   +--------+---------+
         |                      |                      |
         +----------------------+----------------------+
                               |
                               v
                    +--------------------+
                    | Bar-by-Bar         |
                    | Processing Loop    |
                    +--------------------+
                               |
         +---------------------+---------------------+
         |                     |                     |
         v                     v                     v
+--------+--------+  +--------+--------+  +--------+--------+
| Trend Analysis  |  | MTF Analysis    |  | Market State    |
| (5M focus)      |  | (All TFs)       |  | Analysis        |
+-----------------+  +-----------------+  +-----------------+
         |                     |                     |
         +---------------------+---------------------+
                               |
                               v
                    +--------------------+
                    | Setup Quality      |
                    | Detection          |
                    | (5-Factor Score)   |
                    +--------------------+
                               |
                               v
                    +--------------------+
                    | Signal Generation  |
                    | (Entry/Stop/TP)    |
                    +--------------------+
                               |
                               v
                    +--------------------+
                    | Trade Execution    |
                    | Engine             |
                    +--------------------+
                               |
                               v
                    +--------------------+
                    | Trade Record       |
                    | (CSV + JSON)       |
                    +--------------------+
</pre>

----

== Key Decision Points ==

=== When to Generate Signal ===

<pre>
+------------------------------------------------------------------+
|                    SIGNAL GENERATION DECISION TREE                |
+------------------------------------------------------------------+

START
  |
  v
[MTF Alignment Score >= 0.6?] --NO--> NO SIGNAL
  |
  YES
  v
[Setup Quality Grade >= B?] --NO--> NO SIGNAL
  |
  YES
  v
[Current Hour in Blocked Hours?] --YES--> BLOCKED (NO SIGNAL)
  |
  NO
  v
[MA Direction Matches Trade Direction?] --NO--> BLOCKED
  |
  YES
  v
[In Probability Zone Against Trade?] --YES--> BLOCKED
  |
  NO
  v
[Position Already Open?] --YES--> NO NEW SIGNAL
  |
  NO
  v
+-------------------+
| GENERATE SIGNAL!  |
+-------------------+
</pre>

=== Trade Direction Logic ===

<pre>
LONG CONDITIONS (all must be true):
  - Daily trend = UP or NEUTRAL
  - 4H trend = UP
  - 1H trend = UP
  - MA21 slope > 0 (rising)
  - Price above MA21 or bouncing from it
  - Not in upper probability zone (overbought)

SHORT CONDITIONS (all must be true):
  - Daily trend = DOWN or NEUTRAL
  - 4H trend = DOWN
  - 1H trend = DOWN
  - MA21 slope < 0 (falling)
  - Price below MA21 or rejected from it
  - Not in lower probability zone (oversold)
</pre>

----

== Configuration Reference ==

=== Strategy Configuration ===

<pre>
StrategyConfig:
  primary_timeframe: 5M
  ma21_period: 21
  ma200_period: 200
  min_bars_for_analysis: 21
  max_position_size: 10 lots
  max_concurrent_trades: 3
  default_risk_percent: 1.0%
  base_slippage_points: 2.0
</pre>

=== Signal Generator Configuration ===

<pre>
SignalGeneratorConfig:
  commission_per_lot: Rs 20.00
  transaction_tax_rate: 0.005% per leg
  lot_size_multiplier: 100 (MCX)
  min_stop_distance: 40 points
  default_risk_reward: 2.0

  # Filters
  enable_hour_filter: true
  blocked_hours: [9, 22, 23]
  enable_ma_direction_filter: true
  enable_probability_zone_filter: true
</pre>

----

== Performance Analysis Framework (ISOLATION) ==

=== Edge Discovery Process ===

<pre>
STEP 1: BASELINE
  - Run full backtest
  - Calculate: Trades, Win Rate, P&L, Expectancy

STEP 2: SLICE BY DIMENSIONS
  Dimension 1: Market State (range_bound, creeper_move, etc.)
  Dimension 2: Setup Grade (A+, A, B, C, D)
  Dimension 3: Hour of Day (9-23)
  Dimension 4: Month
  Dimension 5: Direction (Long/Short)

STEP 3: IDENTIFY EDGES
  Per slice calculate:
  - Trade count
  - Win rate
  - Net P&L
  - Expectancy = (WR% * Avg Win) + ((1-WR%) * Avg Loss)
  - Profit Factor = Gross Profit / Gross Loss

STEP 4: GATE 1 CRITERIA
  - Win Rate > 30%
  - Expectancy > 0
  - Sample Size >= 30 trades

STEP 5: FILTER/FOCUS
  - Remove toxic slices
  - Trade only edge slices
</pre>

=== Latest Analysis Results ===

'''EDGE Combinations (Profitable):'''
{| class="wikitable"
|-
! Combination !! Trades !! Win% !! Net P&L !! Expectancy
|-
| range_bound + H11 || 100 || 82.0% || Rs +358,640 || Rs +3,586/trade
|-
| creeper_move + H19 || 42 || 78.6% || Rs +123,870 || Rs +2,949/trade
|-
| creeper_move + H21 || 36 || 77.8% || Rs +105,293 || Rs +2,925/trade
|-
| creeper_move + H17 || 30 || 86.7% || Rs +37,426 || Rs +1,248/trade
|}

'''TOXIC Combinations (Loss-Making):'''
{| class="wikitable"
|-
! Combination !! Trades !! Win% !! Net P&L !! Expectancy
|-
| narrow_low_volume + H14 || 38 || 7.9% || Rs -157,167 || Rs -4,136/trade
|-
| creeper_move + H9 || 33 || 21.2% || Rs -107,488 || Rs -3,257/trade
|-
| range_bound + H9 || 110 || 45.5% || Rs -109,227 || Rs -993/trade
|}

----

== File Structure ==

<pre>
services/backtest/
|
+-- src/
|   +-- core/
|   |   +-- pipeline_engine.py      # Main orchestrator
|   |   +-- data_structures.py      # Enums, dataclasses
|   |   +-- base_component.py       # Component base classes
|   |   +-- timeframe_conversion.py # 1min -> all TFs
|   |
|   +-- components/
|   |   +-- trend_analysis_core.py           # Layer 1
|   |   +-- multi_timeframe_analysis.py      # Layer 1a
|   |   +-- market_state_analysis.py         # Layer 2
|   |   +-- setup_quality_detection.py       # Layer 3
|   |   +-- signal_generation_trade_management.py  # Layer 4
|   |   +-- trade_execution_engine.py        # Layer 5
|   |   +-- probability_zone_analysis.py     # Support component
|   |
|   +-- main.py                     # Entry point
|
+-- data/
|   +-- input/
|   |   +-- Crude/
|   |       +-- 1min/crude_1m.csv   # Raw data
|   |       +-- 5min/crude_5m.csv   # Converted
|   |       +-- ... (other TFs)
|   |
|   +-- output/
|       +-- trade_level_data_for_frontend.csv
|       +-- trade_level_data_for_frontend_summary.json
|
+-- docs/
    +-- STRATEGY_SYSTEM_ARCHITECTURE.mediawiki  # This file
</pre>

----

== Glossary ==

{| class="wikitable"
|-
! Term !! Definition
|-
| MTF || Multi-Timeframe - analyzing multiple chart timeframes simultaneously
|-
| MA21 || 21-period Moving Average - primary trend indicator
|-
| MA200 || 200-period Moving Average - long-term trend context
|-
| Setup Grade || A+ to F quality score for trade setups
|-
| Expectancy || Average profit/loss per trade (Rs/trade)
|-
| Profit Factor || Gross Profits / Gross Losses ratio
|-
| BOS || Break of Structure - price breaking previous swing high/low
|-
| CTT || Commodities Transaction Tax (India)
|-
| MCX || Multi Commodity Exchange (India)
|-
| R:R || Risk to Reward Ratio
|-
| Lot Size || 100 barrels for MCX Crude Oil futures
|}

----

== Version History ==

{| class="wikitable"
|-
! Version !! Date !! Changes
|-
| 2.0 || 2026-01-12 || ISOLATION analysis integration, filter documentation
|-
| 1.5 || 2026-01-10 || Added probability zone filtering, hour filters
|-
| 1.0 || 2025-12-01 || Initial 5-layer architecture documentation
|}

[[Category:Trading Systems]]
[[Category:Backtesting]]
[[Category:Technical Documentation]]