Editing Alpha Research (section)

= PART 4: LAYER 2 - MARKET STATE ANALYSIS =

== The 7 Market State Algorithms ==

Our system runs 7 independent algorithms to understand current market context:

{| class="wikitable"
|-
! # !! Algorithm !! What It Detects !! Impact
|-
| 1 || '''Railroad Tracks''' || Strong momentum bars in sequence || +15% bonus
|-
| 2 || '''Creeper Move''' || Slow grinding trend (dangerous) || '''-50% penalty'''
|-
| 3 || '''Two-Day Trend''' || Trend visible on Daily for 2+ days || Required for A+
|-
| 4 || '''Phase Analysis''' || Accumulation/Distribution/Markup/Markdown || Phase mismatch = -25%
|-
| 5 || '''Institutional Activity''' || Big player accumulation/distribution || Fight = 0.7× multiplier
|-
| 6 || '''Break of Structure (BOS)''' || Key level breaks || Affects stop placement
|-
| 7 || '''Volatility Regime''' || High/Normal/Low volatility || Adjusts expectations
|}

== Penalty System ==

{| class="wikitable"
|-
! Condition !! Penalty !! Rationale
|-
| Creeper Move Detected || '''-50 points''' || Slow trends often reverse suddenly
|-
| MA Struggle (price fighting MA) || -30 points || Indecision, likely to chop
|-
| No Two-Day Trend || -30 points || Trend not established enough
|-
| Phase Mismatch || -25 points || Trading against market phase
|-
| No Key Level Nearby || -50 points || No technical confluence
|-
| Institutional Fight || '''×0.70 multiplier''' || Big players fighting each other
|}

== Bonus System ==

{| class="wikitable"
|-
! Condition !! Bonus !! Rationale
|-
| Railroad Tracks || '''+15 points''' || Strong momentum confirmation
|-
| At Key Level || +10 points || Technical confluence present
|-
| Clean Entry Setup || +10 points || Clear technical pattern
|}

== Probability Zone Analysis ==

=== The Asymmetric Probability Edge ===

When odds are low on one outcome, '''the opposite side usually carries high odds''':
* If new high probability drops to 15%, then '''85% odds favor reversal'''
* We position ourselves on high-probability side where price position within recent range determines continuation probability:
* Every large move is divided into '''halves and thirds''', creating probability zones.
=== Odds of Continuation After Pullback ===
<pre>
┌─────────────────────────────────────────────────────┐
│  SWING HIGH                                         │
├─────────────────────────────────────────────────────┤
│  TOP THIRD        →  ~80% chance of new high        │  
├─────────────────────────────────────────────────────┤
│  TOP HALF         →  ~66% chance of new high        │
├─────────────────────────────────────────────────────┤
│  BOTTOM HALF      →  ~33% chance of new high        │
├─────────────────────────────────────────────────────┤
│  BOTTOM THIRD     →  ~15% chance of new high        │  
├─────────────────────────────────────────────────────┤
│  SWING LOW                                          │
└─────────────────────────────────────────────────────┘
</pre>

{| class="wikitable"
|-
! Zone !! Position !! Continuation Probability !! Action
|-
| '''Top Third''' || >66.6% of range || '''80%''' likely to continue higher || Favor LONG
|-
| '''Top Half''' || >50% of range || '''65%''' continuation || Moderate LONG bias
|-
| '''Bottom Half''' || <50% of range || '''35%''' continuation higher || Moderate SHORT bias
|-
| '''Bottom Third''' || <33.3% of range || '''15%''' continuation ('''85% reversal''') || Favor SHORT
|}

=== 3-Finger Spread ===

Measures separation between Price, 21 MA, and 200 MA:

<pre>
Three-Finger Spread Detection:
  - Large spread between Price/21MA/200MA
  - Indicates profit-taking pressure imminent
  - Minimum spread threshold: 2% of price

Structure Types:
  UPTREND:    Price > 21 MA > 200 MA (bullish stack)
  DOWNTREND:  Price < 21 MA < 200 MA (bearish stack)
  SIDEWAYS:   No clear MA separation
</pre>

=== Crash Bar Detection ===

Identifies structural breaks via unusually large bars:

{| class="wikitable"
|-
! Parameter !! Value !! Meaning
|-
| crash_bar_multiplier || 2.0 || Bar must be 2× average size
|-
| crash_bar_lookback || 10 bars || Average calculated over 10 bars
|-
| crash_bar_close_threshold || 30% || Close within 30% of bar extreme
|}

=== Pullback Classification ===

{| class="wikitable"
|-
! Type !! Characteristics !! Action
|-
| '''Healthy Pullback''' || 45° drift, holds above halfway point || Good entry opportunity
|-
| '''Collapse''' || Vertical drop (>60% retracement) || Avoid entry, wait for structure
|-
| '''Bounce''' || Recovery after crash bar || Short opportunity
|}

=== Signal Filtering ===

Probability zones filter signals:

# Zone-based filtering (soft filter - affects score, doesn't block)

if zone_position < 33.3%:  # Bottom third
    # Block LONG signals (only 15% chance of continuation)
    # Allow SHORT signals

if zone_position > 66.7%:  # Top third
    # Allow LONG signals (80% continuation)
    # Block SHORT signals