Polarized Fractal Efficiency Signals for Trend Entries

Summary

This document explains a price-efficiency indicator that compares the straight-line distance between closing prices over a lookback window with the cumulative path traveled between closes. The resulting score is signed according to price direction; its absolute magnitude is described as larger when movement is less efficient. An exponential moving average of the score is then compared with positive and negative bands to generate directional signals.

The note outlines adjustable lookback, smoothing, and band parameters, and describes the approach as a way to assess price movement through fractal geometry concepts. It gives no performance results or empirical validation. It flags parameter overfitting, unreliable signals in turbulent markets, gap sensitivity, and lag as limitations. Suggested refinements include testing parameter choices, adding stops or other indicators, and adapting settings to market conditions. Published settings reference a short BTC/USDT futures test period, but no outcome statistics are supplied.

Key ideas

• The indicator compares endpoint distance with the accumulated close-to-close path over a lookback window.
• The score is positive for rising prices and negative for falling prices.
• An exponential moving average crossing the upper or lower band produces directional signals.
• The method is vulnerable to parameter overfitting, volatile conditions, gaps, and signal lag.
• The document gives test settings but reports no backtest performance results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.