ParetoCapital Volatility Algorithm

ParetoCapital Volatility Algorithm — Strategy Description

This strategy is a volatility-driven breakout system designed to participate only in markets that exhibit sufficient price activity and structural clarity. All signals are evaluated on candle close to ensure stable, non-repainting behavior.

The strategy adapts its execution logic based on long-term market context while maintaining consistent risk exposure across changing volatility regimes.

Volatility Filter

Trades are taken only when current market volatility exceeds a defined baseline. This filter is intended to suppress signals during low-activity or range-bound conditions and to focus execution on periods where directional movement is more likely to persist.

Market Regime Assessment

A long-term reference is used to classify the prevailing market environment:

When price is positioned above the long-term reference, the market is treated as trend-favorable.

When price is below the reference, the market is treated as non-trend or transitional.

This classification determines how entries are structured but does not attempt to forecast direction.

Entry Logic

In trend-favorable conditions, the strategy seeks continuation trades in the direction of the prevailing trend. Entries are triggered only after price confirms strength through a breakout beyond recent levels.

In non-trend conditions, the strategy prepares for volatility expansion in either direction. Trades are initiated only when price breaks decisively beyond recent boundaries, allowing the market to determine direction.

All entries are confirmation-based and are not executed at market without prior price expansion.

Position Sizing and Risk Control

Position size is dynamically adjusted according to current market volatility. Risk per trade is kept proportional and consistent, while overall capital usage is constrained to prevent overexposure.

This approach allows the strategy to remain risk-controlled during both high- and low-volatility environments.

Exit Logic

Positions are exited when price action indicates a material loss of momentum relative to recent market structure. The exit logic is designed to tolerate minor counter-moves while responding decisively to structural weakness.

Key Characteristics

Candle-close confirmation

Non-repainting behavior

Volatility-adaptive execution

Regime-aware trade logic

Systematic risk management

Strategy Objective

The objective of this strategy is to capture a limited number of structurally strong price movements while minimizing exposure during non-productive market conditions. It prioritizes selectivity, confirmation, and risk discipline over trade frequency.

Usage Notes

The strategy is optimized for major cryptocurrencys, where volatility expansion and momentum continuation are more prevalent.
Best results have been observed on BTCUSD using the 15-minute and 30-minute timeframes.

Performance on other assets or timeframes may vary and should be evaluated through independent testing.