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Multi_Timeframe Dynamic Trend (MTFDR)

PART 1: STRATEGY OVERVIEW

What Is This Strategy?

Multi_Timeframe Dynamic Trend(MTDR) is a systematic intraday trading strategy that requires multiple analytical layers to align before taking a trade. Think of it as a layered cake - each layer must be present for a valid setup.

Layered Architecture (Top-Down)

┌─────────────────────────────────────────────────────────────┐
│                                                             │
│   LAYER 1: MULTI-TIMEFRAME ANALYSIS  - FOUNDATION LAYER    │
│   5 timeframes analyzed for trend alignment                 │
│   Daily → 4H → 1H → 15M → 5M                               │
│                                                             │
├─────────────────────────────────────────────────────────────┤
│                                                             │
│   LAYER 2: MARKET STATE ANALYSIS                           │  ← regime/ market state conditions 
│   7 algorithms: Railroad, Creeper, Phase, BOS, etc.         │
│   Calculates penalties and bonuses                          │
│                                                             │
├─────────────────────────────────────────────────────────────┤
│                                                             │
│   LAYER 3: SETUP QUALITY GRADING                           │  ←  set up scoring
│   5-factor weighted scoring → Assigns grade A+ to F         │
│                                                             │
├─────────────────────────────────────────────────────────────┤
│                                                             │
│   LAYER 4: FILTERS (Trade/No_Trade)                        │
│   • Direction: MA21 slope must match trade direction        │Filters
│   • Grade: Only A+, A, B grades can trade                   │
│   • Hours: Block hours ]WIP]                               │
│                                                             │
├─────────────────────────────────────────────────────────────┤
│                                                             │
│   LAYER 5: ENTRY TECHNIQUES                                │  ← Final trigger
│                                                             │
│                                                             │
└─────────────────────────────────────────────────────────────┘

PART 2: Core Concept (Why This Works)

The edge comes from requiring multiple independent confirmations before trading. Each layer filters out bad trades:

Layer What It Filters Out
1. MTF Analysis Counter-trend trades, choppy markets
2. Market State Dangerous conditions (creeper moves, institutional fights)
3. Quality Grading Scores the setup (used by hard filter)
4. Hard Filters Wrong direction, low grades (C/D/F), blocked hours
5. Entry Technique Chasing price far from value areas

The Math

If each layer has 70% accuracy independently:

  • Single layer: 70% edge
  • 2 layers: 70% × 70% = 49% of trades pass, but higher quality
  • 5 layers: Only the best setups survive all filters

Result: Fewer trades, but each trade has multiple confluences supporting it.

PART 3: LAYER 1 - MULTI-TIMEFRAME ANALYSIS (The Foundation)

THIS IS THE FOUNDATION - Everything else builds on top of MTF alignment. If timeframes disagree, we don't trade.

The 5 Timeframes

Timeframe Role Weight
Daily (1D) Overall market bias Highest
4-Hour (4H) Primary trend direction High
1-Hour (1H) Trend confirmation Medium
15-Minute (15M) Entry timing context Lower
5-Minute (5M) Execution timeframe Lowest

What We Analyze Per Timeframe

For each of 5 timeframes, our system calculates:

Analysis Description
MA21 Value 21-period Moving Average
MA21 Slope Rising/Flat/Declining
MA200 Value 200-period Moving Average
Price vs MA21 Above/Below/At the MA
Trend Direction UP/DOWN/NEUTRAL

MTF Alignment Score

For each timeframe:
  1. Determine trend direction (UP/DOWN/NEUTRAL)
  2. Check if aligned with trade direction
  3. Apply timeframe weight
  4. Sum weighted alignment scores

Example (LONG trade):
  Daily:  UP (aligned)     × 1.00 weight = 1.00
  4H:     UP (aligned)     × 0.86 weight = 0.86
  1H:     UP (aligned)     × 0.72 weight = 0.72
  15M:    DOWN (not aligned) × 0.58 weight = 0.00
  5M:     UP (aligned)     × 0.44 weight = 0.44
  ─────────────────────────────────────────────
  Total MTF Score: 3.02 / 3.60 = 83.9% aligned

Why MTF Matters

Scenario MTF Alignment Action
All 5 timeframes aligned ~90% High conviction trade A+ 2lots
4 of 5 aligned ~80% Trade with normal size A 1 lot
3 of 5 aligned ~70% Proceed with caution B 1 lot
2 or fewer aligned <60% No Trade

PART 4: LAYER 2 - MARKET STATE ANALYSIS

The 7 Market State Algorithms

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

# 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

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

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

PART 5: LAYER 3 - SETUP QUALITY GRADING

The 5-Factor Scoring System

Every potential trade is scored on 5 factors:

Factor Weight What It Measures
Timeframe Alignment 30% How well all 5 timeframes agree
Trend Strength 20% Quality of the trend (Railroad vs Creeper)
Key Level Proximity 20% Is entry near significant S/R level?
Entry Quality 15% How clean is the entry technique?
Risk:Reward 15% Is the R:R ratio favorable?

Note: Weights sum to 100%. Timeframe Alignment has highest weight (30%) because MTF is the foundation.

Grade Thresholds

Grade Score Range Action Position Size
A+ 90-100 Trade with full conviction 2 lots
A 80-89 Trade with confidence 1 lot
B 70-79 Trade normally 1 lot
C 60-69 NO TRADE -
D 50-59 NO TRADE -
F <50 NO TRADE -

A+ Grade Special Requirements

To achieve A+ grade, ALL conditions must be true:

  • Final score ≥ 90
  • All 5 timeframes aligned with trade direction
  • Entry within ±25 points of MA21
  • Two-day trend present on Daily
  • No institutional fight detected

Score Calculation Example

Trade Setup: LONG on 5-min chart

Factor Scores (0-100 each):
  Timeframe Alignment: 85  × 0.30 = 25.5
  Trend Strength:      90  × 0.20 = 18.0
  Key Level Proximity: 70  × 0.20 = 14.0
  Entry Quality:       80  × 0.15 = 12.0
  Risk:Reward:         75  × 0.15 = 11.25
                              ──────────
  Base Score:                    80.75

Penalties Applied:
  - No Railroad Tracks: 0
  - No Creeper: 0
  - Has Two-Day: 0
                              ──────────
  Final Score: 80.75 → Grade: A

PART 6: HARD LAYER 4 - FILTERS

HARD FILTERS block trades completely. If ANY hard filter fails, NO TRADE happens regardless of how good the setup looks.

3 Hard Filters

Filter Rule Effect
1. Direction Filter MA21 slope must match trade direction Wrong direction = BLOCKED
2. Grade Filter Only A+, A, B grades allowed C/D/F grades = BLOCKED
3. Hour Filter Block hours [WIP] Blocked hours = BLOCKED

Filter 1: Direction (MA21 Slope)

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 Higher timeframes decide

Filter 2: Grade

Grade Action
A+, A, B PASS - Proceed to entry
C, D, F BLOCKED - No trade

Filter 3: Hour [work in progress examples]

Hour Status Reason
9 (9:00-9:59 AM) BLOCKED Market open volatility
10-21 (10:00 AM - 9:59 PM) ALLOWED Normal trading hours
22 (10:00-10:59 PM) BLOCKED Near market close
23 (11:00-11:59 PM) BLOCKED Market close

PART 7: LAYER 5 - ENTRY TECHNIQUE

MA21 Zone Principle

"The MA is a ZONE, not a thin line or exact value"

Entry is allowed within ±25 points of MA21, not just at the exact MA value.

Why ±25 Points?

  • Price rarely touches MA exactly
  • Allows for normal market noise

Available Entry Techniques

Technique Direction Description
NEAR_MA Both Price within ±25 pts of MA21 (most common)
MA_BOUNCE_LONG Long Price touches MA21 and bounces up
MA_BOUNCE_SHORT Short Price touches MA21 and rejects down
GREEN_BAR_AFTER_PULLBACK Long Bullish candle after pullback to MA
RED_BAR_AFTER_RALLY Short Bearish candle after rally to MA
BOS_ENTRY_LONG Long Break of structure to upside
BOS_ENTRY_SHORT Short Break of structure to downside

PART 8: STOP LOSS CALCULATION

Stop Loss Methods (Priority Order)

Priority Method Description
1 BOS-Based Stop Below/above break of structure level
2 Swing-Based Stop Below recent swing low (LONG) or above swing high (SHORT)
3 Default Stop Fixed 40 points from entry

Minimum Stop Distance

MINIMUM: 40 points

This prevents:

  • Getting stopped out by normal noise
  • Excessive trading costs from tight stops
  • Whipsaws in market manipulations, this varies depending on markets, nature of that trade

PART 9: TARGET CALCULATION

The 50% Rule

Target = 50% of distance to MA21

For mean reversion trades, we target halfway back to the moving average.

Why 50%?

  • Conservative target ensures higher hit rate
  • Based on "divide the move in half" principle
  • Captures partial reversion without being greedy
  • Works well with trailing stop to capture more

Minimum Target Rule

Minimum Target = Risk × 1.5

Example:
  Entry: 5700
  Stop: 5660 (40 points risk)

  50% to MA might give: 30 points
  But minimum is: 40 × 1.5 = 60 points

  Final Target: 5760 (60 points)

PART 10: DYNAMIC STOP MANAGEMENT

Two-Phase Protection

After entry, stops are managed dynamically in two phases:

Phase Trigger Action
Phase 1: Breakeven +25 points profit Move stop to entry + 2 points
Phase 2: Trailing +20 points profit Trail stop using ATR × 2

Phase 1: Breakeven Stop

Configuration:
  breakeven_activation = 25 points
  breakeven_buffer = 2 points

Example (LONG from 5700):
  Price reaches 5725 (+25 pts profit)
  → Stop moves from 5660 to 5702 (entry + 2)
  → Trade is now "risk-free"

Phase 2: Trailing Stop

Configuration:
  trailing_stop_activation = 20 points
  trailing_stop_method = ATR_MULTIPLE
  atr_period = 14 bars
  atr_multiplier = 2.0
  minimum_trail_distance = 15 points

Example (LONG from 5700, ATR = 12):
  Trailing Distance = 12 × 2 = 24 points

  Price at 5740:
  → Trail stop = 5740 - 24 = 5716

  Price at 5760:
  → Trail stop = 5760 - 24 = 5736 (moved UP)

  Price drops to 5736:
  → STOPPED OUT at 5736 (profit locked)

Why Both Phases?

Phase Purpose
Breakeven Eliminate risk quickly once trade moves in favor
Trailing Let winners run while protecting accumulated profit

PART 11: SLIPPAGE & COSTS

Realistic Slippage Model

Event Slippage Rationale
Entry +1.0 point Normal market fill
Stop Loss Exit +2.0 points Stops slip more in fast moves
Target Exit +0.5 points Limit orders have minimal slippage

Cost Structure

Cost Type Value
Commission Rs 20 per lot per side
STT 0.01% on sell side
Exchange Fees ~Rs 2 per lot
Stamp Duty State-dependent

Why Model Slippage?

  • Backtest results must reflect real trading
  • Prevents over-optimistic performance estimates
  • Stop loss slippage is higher because stops often trigger during fast moves
  • Total costs ~Rs 136 per round-trip lot for Crudeoil 1 lot, Nifty 158

PART 12: EXIT RULES

3 Exit Conditions

Exit Type Condition
Stop Loss Price hits stop (original or trailing)
Target Price hits take profit level
Timeout End of day (no overnight holds)

PART 13: PUTTING IT ALL TOGETHER

Trade Flow

┌─────────────────────────────────────────────────────────────────┐
│  STEP 1: Load data for all 5 timeframes                         │
│  Daily, 4H, 1H, 15M, 5M OHLCV data                             │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│  STEP 2: LAYER 1 - MTF Analysis (Foundation)                    │
│  Calculate MA21, MA200, trend direction for each timeframe      │
│  Compute MTF alignment score                                    │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│  STEP 3: LAYER 2 - Market State Analysis                        │
│  Run 7 algorithms: Railroad, Creeper, Phase, BOS, etc.          │
│  Calculate penalties and bonuses                                │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│  STEP 4: LAYER 3 - Setup Quality Grading                        │
│  Score 5 factors, apply penalties/bonuses                       │
│  Assign grade: A+ / A / B / C / D / F                           │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│  STEP 5: LAYER 4 - HARD FILTERS (The Gate)  ◄── PASS/FAIL      │
│  • Direction: MA21 slope matches trade direction?               │
│  • Grade: Is grade A+, A, or B?                                 │
│  • Hour: Is current hour allowed (not 9, 22, 23)?               │
│  ANY FAIL → NO TRADE                                            │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│  STEP 6: LAYER 5 - Entry Technique                              │
│  Is price within ±25 points of MA21?                            │
│  Select entry technique (NEAR_MA, BOS_ENTRY, etc.)              │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│  STEP 7: Calculate Stop Loss                                    │
│  BOS-based → Swing-based → Default (40 pts minimum)             │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│  STEP 8: Calculate Target                                       │
│  50% of distance to MA (minimum 1.5× risk)                      │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│  STEP 9: Execute Trade                                          │
│  Apply entry slippage (+1 pt), create trade record              │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│  STEP 10: Manage Trade                                          │
│  Monitor: Breakeven at +25 pts → Trail at +20 pts               │
│  Exit: Stop hit | Target hit | Timeout                          │
└─────────────────────────────────────────────────────────────────┘

PART 14: HARD vs SOFT FILTERS

Understanding the Difference

Filter Type Behavior Examples
HARD Blocks trade completely Direction filter, Hour filter, Grade C/D/F
SOFT Affects quality score MTF alignment, Market state penalties

Complete Filter List

Filter Type Effect
MA21 Direction HARD Wrong direction = NO TRADE
Hour Filter HARD Hours 9, 22, 23 = NO TRADE
Grade < B HARD C/D/F grades = NO TRADE
MTF Alignment SOFT Low alignment = reduced score (30% weight)
Creeper Move SOFT -50 points penalty
No Two-Day Trend SOFT -30 points penalty
Institutional Fight SOFT 0.7× score multiplier
Far from MA21 SOFT -40 points penalty

APPENDIX A: CONFIGURATION VALUES

Entry Configuration

Parameter Value
entry_timeframe 5-Minute
ma_buffer_points 25 points
blocked_hours [9, 22, 23]

Stop/Target Configuration

Parameter Value
min_stop_distance 40 points
default_risk_reward 1.5
bos_stop_buffer_points 5 points

Dynamic Stop Configuration

Parameter Value
enable_trailing_stop True
trailing_stop_method ATR_MULTIPLE
atr_period 14 bars
atr_multiplier 2.0
trailing_stop_activation 20 points
enable_breakeven_stop True
breakeven_activation 25 points
breakeven_buffer 2 points
minimum_trail_distance 15 points

Slippage Configuration

Parameter Value
base_slippage_points 1.0 point
stop_loss_slippage 2.0 points
take_profit_slippage 0.5 points

Grading Configuration

Parameter Value
timeframe_alignment_weight 30%
trend_strength_weight 20%
key_level_proximity_weight 20%
entry_technique_weight 15%
risk_reward_weight 15%
a_plus_min_score 90
a_min_score 80
b_min_score 70
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