Revision as of 15:25, 5 January 2026

MA21 Mean Reversion Strategy

Complete Trading System Documentation

MCX Crude Oil - Intraday Trading System

PART 1: STRATEGY OVERVIEW

What Is This Strategy?

MA21 Mean Reversion - A systematic intraday trading strategy that enters when price pulls back to the 21-period Moving Average during established trends.

Instrument Details

Parameter	Value
Instrument	MCX Crude Oil Futures
Lot Size	100 barrels
Tick Value	1 point = Rs 100 per lot
Trading Hours	9:00 AM - 11:30 PM IST
Allowed Trading	10:00 AM - 9:00 PM IST (block open/close)

Timeframes Used

Timeframe	Purpose
5-Minute	Primary chart for signals and execution
1-Minute	Entry precision timing
15-Min, 1H, 4H, Daily	Multi-timeframe context (soft filter)

Backtest Results Summary

Metric	Value
Period	19 months
Total Trades	7,534
Win Rate	57.6%
Profit Factor	1.20
Initial Capital	Rs 1.00 Lakhs
Final Value	Rs 26.48 Lakhs
Total Return	2,548%
Max Drawdown	-78.6%

PART 2: THE EDGE (Core Concept)

The Big Idea

Trade pullbacks to the 21-period Moving Average (MA21) during established trends.

When the market is trending, price naturally pulls back to the 21 MA before continuing. We enter at these pullback zones, trading WITH the trend direction.

Why It Works

Mean Reversion - Price tends to return to the average after moving away
Trend Following - We only trade in the direction of the trend
Value Entry - Entering on pullbacks gives better risk:reward
Institutional Behavior - Big players accumulate at MA zones

The "MA is a ZONE" Principle

"The MA is a ZONE, not a thin line"
Entry is allowed within ±25 points of MA21, not just at the exact MA value.

Why ±25 points?

Price rarely touches MA exactly
Gives room for entry without chasing
Accounts for spread and slippage
MCX Crude typical range: 50-100 pts/day

PART 3: DIRECTION DETERMINATION (The Foundation)

THIS IS THE MOST IMPORTANT RULE

The MA21 slope determines the ONLY direction you can trade. This is a HARD FILTER - no exceptions.

MA21 Slope = Trade Direction

MA21 Slope	Allowed Direction	Logic
Rising (↗)	LONG only	Trade with uptrend, never short
Declining (↘)	SHORT only	Trade with downtrend, never long
Flat (→)	Use MTF direction	Let higher timeframes decide

How Slope Is Calculated

Slope Value	Classification	Threshold
> +0.01%	RISING	Bullish - LONG only
< -0.01%	DECLINING	Bearish - SHORT only
Between ±0.01%	FLAT	Use MTF consensus

Why 80% of Trades Were SHORT

In our 19-month backtest:

6,024 SHORT trades (80%)
1,510 LONG trades (20%)

Reason: During the backtest period, MCX Crude Oil had a predominantly declining MA21 slope. The system correctly identified this bearish bias and took mostly short trades.

This is NOT a flaw - it shows the system adapts to market conditions.

Direction Determination Algorithm

<source lang="python"> def determine_direction(ma21_slope, mtf_direction):

   """
   THE PRIMARY FILTER - Direction must align with MA21 slope.
   This filter runs BEFORE any other analysis.
   """
   if ma21_slope > 0.0001:  # 0.01% threshold
       return LONG  # Rising MA = LONG only

   elif ma21_slope < -0.0001:  # -0.01% threshold
       return SHORT  # Declining MA = SHORT only

   else:  # Flat MA
       return mtf_direction  # Use multi-timeframe consensus

</source>

PART 4: ENTRY CONDITIONS (Gate Checks)

Overview: Hard vs Soft Filters

Filter Type	Behavior	Examples
HARD	Must pass ALL or NO TRADE	MA21 slope, hour filter, price in zone, grade
SOFT	Affects score but doesn't block	MTF alignment, market state, penalties

HARD FILTERS (Must Pass ALL)

These filters block trades entirely if any one fails:

1. MA21 Slope Alignment

Direction MUST match MA21 slope
Rising MA = LONG only
Declining MA = SHORT only
Fail = NO TRADE

2. Price in MA Zone

Price must be within ±25 points of MA21
Too far above/below = not a pullback entry
Fail = NO TRADE

3. Hour Filter

Block hours: 9, 22, 23 (market open/close volatility)
Allowed: 10:00 AM - 9:00 PM IST
Fail = NO TRADE

4. Setup Quality Grade

Must achieve grade A+, A, or B (score ≥ 70)
Grade C/D/F = not good enough quality
Fail = NO TRADE

SOFT FILTERS (Affect Score)

These filters affect the quality score but don't block trades:

Filter	Effect	Impact
MTF Alignment	30% weight in grading	Low alignment = lower score
Creeper Move	-50 penalty	Can still pass if base high
Railroad Trend	+15 bonus	Quality boost
Price-MA Struggle	-30 penalty	Can still pass
Wrong Trend Phase	-25 penalty	Can still pass
Institutional Fight	0.7x multiplier	Reduces but doesn't block

Filter Flow Diagram

PRICE BAR RECEIVED
       │
       ▼
┌──────────────────────────────────────────┐
│  HARD FILTER 1: MA21 Slope Alignment     │
│  Is direction aligned with MA21 slope?   │
│  Rising MA + LONG signal = ✓             │
│  Rising MA + SHORT signal = ✗ NO TRADE   │
└──────────────────────────────────────────┘
       │ PASS
       ▼
┌──────────────────────────────────────────┐
│  HARD FILTER 2: Price in MA Zone         │
│  Is price within ±25 pts of MA21?        │
│  YES = ✓  |  NO = ✗ NO TRADE            │
└──────────────────────────────────────────┘
       │ PASS
       ▼
┌──────────────────────────────────────────┐
│  HARD FILTER 3: Hour Filter              │
│  Is current hour allowed?                │
│  Hours 10-21 = ✓  |  9,22,23 = ✗ NO TRADE│
└──────────────────────────────────────────┘
       │ PASS
       ▼
┌──────────────────────────────────────────┐
│  SOFT FILTERS: Calculate Quality Score   │
│  • MTF alignment (30%)                   │
│  • Trend strength (20%)                  │
│  • Key level proximity (20%)             │
│  • Entry quality (15%)                   │
│  • Risk/Reward (15%)                     │
│  ± Penalties and Bonuses                 │
└──────────────────────────────────────────┘
       │
       ▼
┌──────────────────────────────────────────┐
│  HARD FILTER 4: Grade Check              │
│  Score ≥ 70 = Grade B+ = ✓ TRADE        │
│  Score < 70 = Grade C- = ✗ NO TRADE     │
└──────────────────────────────────────────┘
       │ PASS
       ▼
    GENERATE SIGNAL

PART 5: MULTI-TIMEFRAME (MTF) ANALYSIS

Note: MTF is a SOFT FILTER (30% weight). It contributes to the quality score but does NOT block trades on its own. A trade with poor MTF alignment can still pass if other factors compensate.

Timeframe Hierarchy

We analyze 5 timeframes from highest to lowest:

Timeframe	Purpose	Weight
Daily (1D)	Context/Bias	Highest weight
4-Hour (4H)	Primary Trend	High weight
1-Hour (1H)	Confirmation	Medium weight
15-Min (15M)	Entry Timing	Lower weight
5-Min (5M)	Execution	Lowest weight

Per-Timeframe Analysis

For each timeframe, the Trend Analysis Core calculates:

1. Trend Direction

MA21 Slope	Direction
> +0.01%	UP
< -0.01%	DOWN
Between ±0.01%	SIDEWAYS

2. MA Trending Status

MA Slope Magnitude	Status
> 0.05%	TRENDING (MA is clearly moving)
< 0.05%	FLAT (MA is consolidating)

3. Price-MA Struggle Detection

Condition	Detection	Impact
Price within 0.5% of MA21 for multiple bars	STRUGGLING	-30 penalty
Price clearly moving away from MA21	CLEAR TREND	No penalty

Alignment Score Calculation

For each timeframe:
  - Check if direction matches expected direction
  - Assign weight based on timeframe importance

Alignment Score = Σ(Weight_i × Aligned_i) / Σ(Weight_i)

Example:
  Daily: UP (aligned) × 1.0 weight = 1.0
  4H: UP (aligned) × 0.86 weight = 0.86
  1H: UP (aligned) × 0.72 weight = 0.72
  15M: DOWN (not aligned) × 0.58 weight = 0
  5M: UP (aligned) × 0.44 weight = 0.44

  Score = (1.0 + 0.86 + 0.72 + 0 + 0.44) / (1.0 + 0.86 + 0.72 + 0.58 + 0.44)
        = 3.02 / 3.60 = 0.84 (84% alignment)

PART 6: MARKET STATE DETECTION

The system detects 7 market state patterns that affect setup quality:

1. Railroad Trend Detection

What: Strong, consistent trend with minimal pullbacks.

Characteristic	Threshold
Bar Analysis	5 most recent bars
Strong Bars	80%+ must close in same direction
Bar Body	> 0.3% of price

Impact: +15 bonus to setup score

2. Creeper Move Detection

What: Slow, grinding price action with small bars.

Characteristic	Threshold
Bar Range	Average < 0.5% of price
Analysis Period	Last 7 bars

Impact: -50 penalty to setup score (avoid these!)

3. Two-Day Trend Analysis

What: Trend must be visible on Daily for 2+ days.

Requirement	Description
Daily Bars	2+ consecutive bars in same direction
Purpose	Filters noise, ensures real trend

Impact: Missing = -30 penalty

4. Trend Phase Classification

Phase	Bars into Trend	Action	Impact
EARLY	0-15 bars	Avoid	-25 penalty
MIDDLE	15-40 bars	TARGET	No penalty
LATE	40+ bars	Avoid	-25 penalty

5. Institutional Fight Detection

What: Big players battling each other.

Indicator	Sign
Volume	1.5x+ average
Price Action	Narrow range with high volume
Wicks	Long wicks (rejection)

Impact: 0.7x multiplier on final score

6. Break of Structure (BOS)

What: Price breaking significant swing high/low.

BOS Type	Description
SWING_HIGH_BREAK	Price breaks above prior swing high
SWING_LOW_BREAK	Price breaks below prior swing low
PDH_BREAK	Previous Day High break
PDL_BREAK	Previous Day Low break

7. Volatility Classification

Volatility	ATR % of Price	Adjustment
HIGH	> 1.0%	Wider stops needed
MEDIUM	0.3% - 1.0%	Normal stops
LOW	< 0.3%	Tighter stops

PART 7: SETUP QUALITY GRADING

5-Factor Weighted Scoring

Every potential trade is scored on 5 factors:

Factor	Weight	What It Measures
Timeframe Alignment	30%	How well all timeframes agree
Trend Strength	20%	Quality of trend (railroad vs creeper)
Key Level Proximity	20%	Is entry near significant level?
Entry Quality	15%	Clean entry technique, near MA
Risk/Reward	15%	How favorable is the R:R

Score Calculation

Base Score = (TF_score × 0.30) + (Trend_score × 0.20) + (KeyLevel_score × 0.20)
           + (Entry_score × 0.15) + (RR_score × 0.15)

Adjusted Score = Base Score + Bonuses - Penalties

If Institutional Fight: Final Score = Adjusted Score × 0.7

Penalties

Condition	Penalty	Reason
Creeper Move	-50	Poor quality price action
MA Struggle	-30	Price fighting the MA
No Two-Day Trend	-30	Trend not established
Wrong Trend Phase	-25	Not in MIDDLE phase
Far from Key Level	-50	No confluence
Far from MA	-40	Not a pullback entry

Bonuses

Condition	Bonus	Reason
Railroad Trend	+15	High quality trend
At Key Level	+10	Confluence present
Clean Entry	+10	Clear technical setup

Grade Thresholds

Grade	Min Score	Action
A+	90+	Trade with full conviction
A	80-89	Trade with confidence
B	70-79	Trade normally
C	60-69	NO TRADE
D	50-59	NO TRADE
F	<50	NO TRADE

A+ Special Requirements

To achieve A+ grade, ALL must be true:

Score ≥ 90
All timeframes aligned
Entry near MA21 (within ±25 pts)
Two-day trend present
No institutional fight

PART 8: ENTRY TECHNIQUES

Available Techniques

Universal (Both Directions)

Technique	Description
NEAR_MA	Entry when price is near MA21 zone (±25 pts)

Long-Specific

Technique	Description
GREEN_BAR_AFTER_PULLBACK	Green candle after pullback
MA_BOUNCE_LONG	Bounce off MA21 in uptrend
BOS_ENTRY_LONG	Entry after break of structure (upside)
BREAKOUT_PULLBACK_LONG	Pullback after breakout
DISCOUNT_ZONE_LONG	Buy in lower zone of range

Short-Specific

Technique	Description
RED_BAR_AFTER_RALLY	Red candle after rally
MA_BOUNCE_SHORT	Rejection from MA21 in downtrend
BOS_ENTRY_SHORT	Entry after break of structure (downside)
BREAKOUT_PULLBACK_SHORT	Pullback after breakdown
PREMIUM_ZONE_SHORT	Sell in upper zone of range

Selection Logic

<source lang="python"> def select_entry_technique(price, ma21, direction, has_bos, has_pullback):

   # Most common: price near MA zone
   if abs(price - ma21) <= 25:
       return NEAR_MA

   # Break of structure detected
   elif has_bos:
       if direction == LONG:
           return BOS_ENTRY_LONG
       else:
           return BOS_ENTRY_SHORT

   # Pullback pattern detected
   elif has_pullback:
       if direction == LONG:
           return GREEN_BAR_AFTER_PULLBACK
       else:
           return RED_BAR_AFTER_RALLY

   # Default: MA bounce
   else:
       if direction == LONG:
           return MA_BOUNCE_LONG
       else:
           return MA_BOUNCE_SHORT

</source>

PART 9: PROBABILITY ZONES

Halves & Thirds Analysis

Based on price position within recent swing range:

Zone	Position	Continuation Probability
Top Third	67-100%	80% chance of new high
Top Half	50-67%	65% continuation
Bottom Half	33-50%	35% continuation
Bottom Third	0-33%	15% (85% likely lower)

Zone-Based Trading Rules

Trending Market

Zone	LONG	SHORT
Top Third	Allowed (after pullback)	Blocked
Bottom Third	Blocked	Allowed (after rally)

Sideways Market

Zone	LONG	SHORT
Top Third	Blocked (overextended)	Allowed
Bottom Third	Allowed	Blocked

Three-Finger Spread

What: Large separation between Price, MA21, and MA200.

Detection:
- Distance(Price to MA21) > 2% of price
- AND Distance(MA21 to MA200) > 2% of price

Impact: Expect profit-taking soon (bearish for longs, bullish for shorts)

Crash Bar Detection

What: Abnormally large bar indicating structural break.

Characteristic	Threshold
Bar Size	2x average bar size
Close Position	Within 30% of extreme

Special Rule: Crash bar in sideways market + top zone → Override to SHORT

PART 10: EXIT MANAGEMENT

Overview

Exit Type	Trigger	Typical Result
Stop Loss	Price hits stop (static or trailing)	Loss or locked profit
Take Profit	Price hits target	Winner (always)
Timeout	8 hours elapsed	Exit at market

Initial Stop Loss: 40 Points

Method	Description
Default	40 points from entry
Structure-Based	Below swing low (LONG) / Above swing high (SHORT)
MA-Based	MA21 value ± 25 points buffer
Minimum	Always at least 40 points

Stop by Entry Technique

Technique	Stop Placement
NEAR_MA	40 pts default
BOS_ENTRY	Below/above structure (10-bar lookback + 5pt buffer)
MA_BOUNCE	Below/above MA21 zone
BREAKOUT_PULLBACK	Below/above pullback low/high

DYNAMIC STOP MANAGEMENT

IMPORTANT: Stop loss is NOT static! It moves dynamically to lock in profits.

This explains why 72.3% of exits are "stop" but many are profitable trades!

Phase 1: Breakeven Stop

Trigger: When trade reaches 25 points profit

Parameter	Value
Activation	25 points in profit
New Stop	Entry price + 2 pts buffer
Purpose	Eliminate loss, lock small profit

Example (LONG at 5500):

Entry: 5500
Original Stop: 5460 (40 pts risk)

Price reaches 5525 (+25 pts profit):
→ Stop moves from 5460 to 5502 (entry + 2 buffer)
→ Worst case now = +2 pts profit (NOT -40 loss!)

Phase 2: Trailing Stop (ATR-Based)

Trigger: When trade reaches 20 points profit

Parameter	Value
Method	ATR_MULTIPLE (adapts to volatility)
ATR Period	14 bars
ATR Multiplier	2.0
Trailing Distance	ATR × 2 (dynamic)
Minimum Distance	15 points
Activation	20 points in profit

How It Works:

Current ATR = 12 points
Trailing Distance = 12 × 2 = 24 pts

Price at 5540 (LONG from 5500):
→ New Stop = 5540 - 24 = 5516

Price at 5560:
→ New Stop = 5560 - 24 = 5536 (moved UP)

Price reverses to 5536:
→ EXIT at 5536 = +36 pts PROFIT
→ Shows as "stop" exit but is profitable!

Key Rule: Stop can only move in profitable direction, NEVER back.

Complete Stop Movement Example

LONG Entry: 5500
Original Stop: 5460 (-40 pts risk)
Target: 5560 (+60 pts)

Trade Progress:
─────────────────────────────────────────────────
Price    Profit   Action                Stop Now
─────────────────────────────────────────────────
5500     0        Entry                 5460
5510     +10      Waiting...            5460
5520     +20      Trailing activates    5490 (5520-30)
5525     +25      Breakeven activates   5502 (max of 5490, 5502)
5540     +40      Trail continues       5510
5560     +60      TARGET HIT!           ---

OR if price reverses:
5540     +40      Trail at 5510         5510
5520     +20      Stop unchanged        5510
5510     +10      STOP HIT              EXIT +10 profit
─────────────────────────────────────────────────

Take Profit: 60 Points

Calculation	Value
Primary	50% of distance to MA21
Minimum	Risk × 1.5 = 40 × 1.5 = 60 pts
Final	MAX(50% to MA, 60 pts) = Usually 60 pts

Risk:Reward = 1.5:1

Risk 40 pts to gain 60 pts
Risk Rs 4,000 to gain Rs 6,000

Timeout: 8 Hours

If trade doesn't hit stop or target within 8 hours
Exit at current market price
Prevents overnight holding
Used in 5% of trades (374 out of 7,534)

Slippage Modeling

Exit Type	Slippage
Entry (base)	+1.0 points
Stop Loss exit	+2.0 points (worse fill)
Take Profit exit	+0.5 points (limit order)
Market Impact	Up to 2.0 points (capped)

PART 11: RISK MANAGEMENT

Position Sizing

Parameter	Value
Position Size	1 lot (100 barrels)
Risk per Trade	40 pts × Rs 100 = Rs 4,000
Reward per Trade	60 pts × Rs 100 = Rs 6,000
Max Concurrent	1 trade at a time

Cost Structure

Cost Type	Value
Brokerage	Rs 20 per lot per leg (Dhan)
CTT	0.01% on sell side
Total Round-trip	~Rs 95 per trade
Total Costs (7,534 trades)	Rs 5.93 Lakhs

Risk Metrics

Metric	Value
Risk per Trade	Rs 4,000 (4% of initial capital)
Risk:Reward	1:1.5 (40:60)
Required Win Rate	40% to break even
Actual Win Rate	57.6% (profitable)

PART 12: SIGNAL GENERATION FLOW

Complete Pipeline

┌─────────────────────────────────────────────────────────────────────────────┐
│                         SIGNAL GENERATION PIPELINE                         │
├─────────────────────────────────────────────────────────────────────────────┤
│                                                                             │
│  STEP 1: DATA COLLECTION                                                    │
│  ┌─────────────────────────────────────────────────────────────────────┐   │
│  │ • Load OHLCV data for all 5 timeframes                              │   │
│  │ • Calculate MA21 and MA200 for each timeframe                       │   │
│  │ • Calculate ATR for volatility measurement                          │   │
│  └─────────────────────────────────────────────────────────────────────┘   │
│                              ↓                                              │
│  STEP 2: DIRECTION DETERMINATION (HARD FILTER #1)                          │
│  ┌─────────────────────────────────────────────────────────────────────┐   │
│  │ • Calculate MA21 slope on 5-min chart                               │   │
│  │ • Rising slope → LONG only allowed                                  │   │
│  │ • Declining slope → SHORT only allowed                              │   │
│  │ • Flat slope → Use MTF direction                                    │   │
│  └─────────────────────────────────────────────────────────────────────┘   │
│                              ↓                                              │
│  STEP 3: HARD FILTER CHECKS                                                │
│  ┌─────────────────────────────────────────────────────────────────────┐   │
│  │ □ Is price within ±25 pts of MA21?          → NO = SKIP             │   │
│  │ □ Is current hour allowed? (not 9,22,23)    → NO = SKIP             │   │
│  └─────────────────────────────────────────────────────────────────────┘   │
│                              ↓                                              │
│  STEP 4: MULTI-TIMEFRAME ANALYSIS                                          │
│  ┌─────────────────────────────────────────────────────────────────────┐   │
│  │ • Analyze trend direction in 5 timeframes                           │   │
│  │ • Calculate weighted alignment score                                │   │
│  │ • Output: 0.0 to 1.0 alignment score (30% of grade)                │   │
│  └─────────────────────────────────────────────────────────────────────┘   │
│                              ↓                                              │
│  STEP 5: MARKET STATE ANALYSIS                                             │
│  ┌─────────────────────────────────────────────────────────────────────┐   │
│  │ • Railroad Trend Detection (+15 bonus)                              │   │
│  │ • Creeper Move Detection (-50 penalty)                              │   │
│  │ • Two-Day Trend Check (-30 if missing)                              │   │
│  │ • Trend Phase Classification (-25 if wrong)                         │   │
│  │ • Institutional Fight Detection (0.7x multiplier)                   │   │
│  └─────────────────────────────────────────────────────────────────────┘   │
│                              ↓                                              │
│  STEP 6: SETUP QUALITY GRADING                                             │
│  ┌─────────────────────────────────────────────────────────────────────┐   │
│  │ • Calculate 5-factor weighted score                                  │   │
│  │ • Apply penalties and bonuses                                       │   │
│  │ • Assign grade: A+, A, B, C, D, F                                   │   │
│  │ • Grade < B (score < 70) → SKIP                                     │   │
│  └─────────────────────────────────────────────────────────────────────┘   │
│                              ↓                                              │
│  STEP 7: SIGNAL OUTPUT                                                     │
│  ┌─────────────────────────────────────────────────────────────────────┐   │
│  │ • Direction: LONG or SHORT                                          │   │
│  │ • Entry Price: Current close                                        │   │
│  │ • Stop Loss: 40 points (or structure-based)                         │   │
│  │ • Take Profit: 60 points                                            │   │
│  │ • Entry Technique: NEAR_MA, BOS_ENTRY, etc.                         │   │
│  │ • Grade: A+, A, or B                                                │   │
│  └─────────────────────────────────────────────────────────────────────┘   │
│                              ↓                                              │
│  STEP 8: TRADE EXECUTION                                                   │
│  ┌─────────────────────────────────────────────────────────────────────┐   │
│  │ • Apply entry slippage (1 pt)                                       │   │
│  │ • Monitor for stop/target/timeout                                   │   │
│  │ • Update trailing stop when in profit                               │   │
│  │ • Execute exit with appropriate slippage                            │   │
│  └─────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
└─────────────────────────────────────────────────────────────────────────────┘

PART 13: BACKTEST RESULTS

Summary Statistics

Metric	Value
Period	19 months
Initial Capital	Rs 1,00,000
Final Value	Rs 26,48,101
Total Profit	Rs 25,48,101
Total Return	2,548%
Peak Value	Rs 28,35,039
Max Drawdown	-78.6%
Total Costs	Rs 5,93,160

Trade Statistics

Metric	Value
Total Trades	7,534
Winners	4,338 (57.6%)
Losers	3,196 (42.4%)
Profit Factor	1.20
Average Win	Rs 3,464
Average Loss	Rs 3,904
Largest Win	Rs 26,799
Largest Loss	Rs 13,217
Avg Holding Time	2.4 hours

Exit Reason Breakdown

Exit Type	Count	%	Notes
Stop	5,444	72.3%	Includes trailing stop profits!
Target	1,716	22.8%	100% winners
Timeout	374	5.0%	8-hour limit

Why are 72% stops but 57% winners?

Because of the trailing stop! Many "stop" exits are actually:

Breakeven exits (+2 pts)
Trailing stop exits (+10 to +50 pts)

The trailing stop LOCKS IN profits, then exits when price reverses.

Direction Distribution

Direction	Count	%
SHORT	6,024	80%
LONG	1,510	20%

Why 80% SHORT? The market had a predominantly declining MA21 during the backtest period. The system correctly adapted to bearish conditions.

Setup Quality Distribution

Grade	Count	%
A+	3,457	45.9%
A	551	7.3%
C	3,526	46.8% (analyzed but NOT traded)

PART 14: KEY STRATEGY PRINCIPLES

MA21 Slope = Direction - The primary hard filter. Rising MA = LONG only, Declining MA = SHORT only.

MA is a ZONE - Enter within ±25 pts of MA21, not just at exact value.

Quality over Quantity - Only trade A+, A, B grades (score ≥ 70).

Avoid Creeper Moves - -50 penalty ensures we skip low-quality price action.

Trade the MIDDLE - Focus on middle phase of trends (bars 15-40).

Dynamic Stop Management - Breakeven at 25 pts, trailing with ATR×2.

1.5:1 Risk:Reward - Risk 40 pts to gain 60 pts.

Time Discipline - Maximum 8-hour holding, no overnight.

MTF as Soft Filter - Contributes to score (30%) but doesn't block alone.

Trailing Explains Stops - 72% "stop" exits include profitable trailing stops.

APPENDIX A: CONFIGURATION VALUES

Stop/Target Configuration

Parameter	Value	Source
min_stop_distance	40 points	signal_generation_trade_management.py
default_stop_distance	40 points	signal_generation_trade_management.py
default_risk_reward	1.5	signal_generation_trade_management.py
min_target	risk × 1.5 = 60 pts	signal_generation_trade_management.py

Trailing Stop Configuration

Parameter	Value	Source
enable_trailing_stop	True	trade_execution_engine.py
trailing_stop_method	ATR_MULTIPLE	trade_execution_engine.py
atr_period	14 bars	trade_execution_engine.py
atr_multiplier	2.0	trade_execution_engine.py
trailing_stop_activation	20 points	trade_execution_engine.py
enable_breakeven_stop	True	trade_execution_engine.py
breakeven_activation	25 points	trade_execution_engine.py
breakeven_buffer	2 points	trade_execution_engine.py

Grading Configuration

Parameter	Value	Source
timeframe_alignment_weight	30%	setup_quality_detection.py
trend_strength_weight	20%	setup_quality_detection.py
key_level_proximity_weight	20%	setup_quality_detection.py
entry_technique_weight	15%	setup_quality_detection.py
risk_reward_weight	15%	setup_quality_detection.py

APPENDIX B: SOURCE CODE REFERENCE

File	Purpose
`trend_analysis_core.py`	MA slope calculation, trend direction, price-MA struggle
`multi_timeframe_analysis.py`	MTF alignment scoring across 5 timeframes
`market_state_analysis.py`	7 market state detection algorithms
`setup_quality_detection.py`	5-factor grading system with penalties/bonuses
`probability_zone_analysis.py`	Halves/Thirds, Three-Finger Spread, Crash Bar
`signal_generation_trade_management.py`	Entry/Exit logic, stop/target calculation
`trade_execution_engine.py`	Breakeven, Trailing stop, Slippage, Timeout
`data_manager.py`	OHLCV data loading and management

Document generated from code analysis - January 2026

All rules extracted directly from source code implementation