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- | ------------- | - | -------------------------- |
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| Rs +25,48,101 | | 19-month validation period |
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| 57.6% | | Above 55% threshold |
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| 1.20 | | Risk-adjusted returns |
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| 7,534 | | Statistical significance |
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| Rs 1,00,000 | | Starting portfolio |
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| Rs 26,48,101 | | 2548% return |
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Branch: rikk_mtf_backtest001
Commit: 68dae212
"In trading systems, empirical results > theoretical understanding. If the backtest shows it works, we ship it."
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Core Trading Philosophy
Foundational Principles
- Simple systems outperform complex ones
- Market behavior is probabilistic, not predictive
- Goal is asymmetric probability positioning, not prediction
Asymmetric Probability Edge
When probability of continuation drops, reversal odds rise.
- 15% continuation ⇒ ~85% reversal probability
- Strategy positions on the higher-probability side
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Probability Zones (Halves & Thirds)
Large moves are divided into probability zones.
- Top Third → ~80% continuation (ideal SHORT zone)
- Top Half → ~65% continuation
- Bottom Half → ~35% continuation
- Bottom Third → ~15% continuation (ideal LONG zone)
Code Reference:
enable_probability_zone_filter = True
probability_zone_swing_lookback = 20
probability_zone_min_range = 20.0
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Crash Play (Core Strategy)
Crash Bar Definition
- Bar > 2x recent average size
- Fast, violent, elongated move
- Indicates structural break
Crash Play Logic
- Identify crash bar
- Divide into halves & thirds
- Wait for bounce into zones
- Enter on color change or upper-zone test
Statistical Edge:
- ~85% odds favor continuation after crash
Code Reference:
crash_bar_multiplier = 2.0
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Pullback vs Collapse
Healthy Pullback
- 45° drift, no violent bars
- Holds above midpoint of prior run
- Odds favor continuation
Collapse (No Trade)
- Vertical, violent selling
- Deep break of structure
- Institutional liquidation
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Identifying Market Tops
Major tops usually show 2+ of the following:
- 3–5 leg run-up
- Vertical acceleration in final leg
- Exhaustion bar
- Three-Finger Spread (Price–MA21–MA200)
Code Reference:
three_finger_spread_threshold = 0.02
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Entry Methodology
The Fab Four
- Previous Day High/Low
- 21-period MA
- 200-period MA
- Yesterday’s Close
MA is treated as a zone, not a line.
Code Reference:
ma_buffer_points = 25.0
Entry Hierarchy
- Shorts: price just below Fab Four (ceiling)
- Longs: price just above Fab Four (floor)
Multi-Timeframe Alignment
2m, 5m, 15m, Daily alignment = high-quality setup
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Stop Loss Methodology
Stop Types
- Event-based stop (preferred)
- Maximum loss stop (fallback)
Goal: Stop beyond Fab Four helping zone.
Code Reference:
min_stop_distance = 40
default_stop_distance = 40
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Color Change Confirmation
Entry Trigger
- Short: red closes below prior green low
- Long: green closes above prior red high
Rule: Do not wait for bar completion.
Profit Taking (Two-Bar Rule)
- First opposite bar → ignore
- Second follow-through bar → take profit
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Trading Glossary (Engineer-Friendly)
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| Small bars, quiet trend | | Reversal risk |
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| Alternating bars near MA | | Healthy trend |
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| Sustained MA bias | | A+ requirement |
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| >2x bar size | | Structural break |
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| Key reference levels | | Stop logic |
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System Architecture Overview
Data → Trend → Market State → Setup Quality → Signal → Execution
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Setup Quality Scoring
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| 30% |
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| 20% |
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| 15% |
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| 20% |
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| 15% |
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Grades:
- A+ ≥ 90 (Auto)
- A ≥ 80 (Auto)
- B–D ≥ 60 (Manual)
- F < 50 (Skip)
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Decision Trees
- Hour filter → MA alignment → Probability zone → Setup score → Grade → Execute
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Last Updated: 2026-01-05 | Branch: rikk_mtf_backtest001 | Validated: 19-month backtest
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