QRAT2025 / z.Others /VTR_DMag_System_Explanation.md

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Detailed Analysis of the Trading System (From Image)

This document provides a full technical explanation of the formulas, logic, and signal construction shown in the reference image. It covers Volume Conditions, VTR logic, Directional Movement (DM), DI, DX, and DMag (ADX), including how everything connects into a complete trading signal framework.

1. Notation & Preliminaries

t : current candle index\
t-1, t-i : previous candles\
High_t, Low_t, Close_t, Open_t : OHLC values\
Vol_t : current volume (tick or real volume)\
TR_t : True Range\
VTR(m,l) : Volatility Threshold Range

All calculations are performed bar-by-bar with proper shifting.

2. Volume Gate (VG)

Condition:

Vol_t ≥ VG

Where:

VG = mean(Vol_{t-L} ... Vol_{t-1}) × factor

This ensures the current candle trades with sufficient participation.

3. Volume Boom Condition

Formula from Image:

Vol_t ≥ 2 × Σ Vol_{t-i}, i = 1..10

This requires the current volume to be at least double the total volume of the last 10 candles.

4. True Range (TR)

TR_t = max(
    High_t - Low_t,
    |High_t - Close_{t-1}|,
    |Low_t - Close_{t-1}|
)

This captures raw price volatility including gaps.

5. VTR (Volatility Threshold Range)

VTR_t = m × (1/l) × Σ TR_{t-i}, i = 0..(l-1)

Image uses:

VTR(3,12)
VTR(10,1)
VTR(11,2)

Each VTR scales volatility across different horizons.

6. Market Bias from VTR

Bullish Bias:

VTR1 > Price_t ∧ VTR2 > Price_t ∧ VTR3 > Price_t

Bearish Bias:

VTR1 < Price_t ∧ VTR2 < Price_t ∧ VTR3 < Price_t

Otherwise: No-trade zone.

7. Directional Movement (+DM / -DM)

UpMove   = High_t - High_{t-1}
DownMove = Low_{t-1} - Low_t

+DM_t = UpMove   if UpMove > DownMove and UpMove > 0 else 0
-DM_t = DownMove if DownMove > UpMove and DownMove > 0 else 0

8. Wilder Smoothing (14 Periods)

Smooth_t = Smooth_{t-1} - (Smooth_{t-1}/14) + Raw_t

Applied to:

9. Directional Indicators

+DI = 100 × (+DM_smooth / TR_smooth)
-DI = 100 × (-DM_smooth / TR_smooth)

10. Directional Index DX

DX = 100 × |+DI - -DI| / (+DI + -DI)

11. DMag (ADX)

Initial:

ADX_14 = mean(DX[0..13])

Then:

ADX_t = ((13 × ADX_{t-1}) + DX_t) / 14

12. DMag Filter

DMag > 20 ∧ DMag > DMag[1]

Confirms strong and strengthening trend.

13. Final Signal Logic

Bullish Signal:

Volume Boom
∧ Volume Gate
∧ VTR Bullish Bias
∧ ADX > 20 and rising

Bearish Signal:

Volume Boom
∧ Volume Gate
∧ VTR Bearish Bias
∧ ADX > 20 and rising

Dots are placed on the chart where these conditions occur.

14. Algorithm Flow Summary

Compute TR
Compute VTRs
Check Volume Gate
Check Volume Boom
Compute +DM / -DM
Wilder smooth TR & DM
Compute +DI, -DI
Compute DX
Compute DMag (ADX)
Apply DMag filter
Apply VTR bias
Generate signal
Plot signal dots

This MD file represents a direct systematic breakdown of the entire strategy logic from the image.

VTR–DMag System — Detailed Formula Walkthrough

This document is a structured Markdown version of the full detailed explanation (Sections 1–18) of the system shown in the image. It covers Volume Gate, Volume Boom, VTR, True Range, Directional Movement (+DM/−DM), DI, DX, and DMag (ADX), including formulas, logic flow, implementation notes, pitfalls, and example usage.

1. Notation & Preliminaries

Time index: t = current bar, t-1 = previous bar
Price:
- High_t, Low_t, Close_t, Open_t
Volume: Vol_t
Parameters:
- m, l → VTR scaling parameters
- L → Volume Gate lookback
- n = 14 → Wilder smoothing period

2. Volume Gate (VG)

Formula:

Vol_t ≥ VG

Typical implementation:

VG_t = mean(Vol_{t-L...t-1}) × factor

Logic:

Blocks low-volume noise
Only allows trades during sufficient participation

Notes:

Use L = 20–50
Use factor = 1.0–2.0
Requires min_periods = L

3. Volume Boom

Image Formula:

Vol_t ≥ 2 × Σ_{i=1}^{10} Vol_{t-i}

Interpretation:

Current volume must exceed twice the sum of the previous 10 bars
This detects extreme participation surges

4. True Range (TR)

Standard Formula:

TR_t = max(
    High_t − Low_t,
    |High_t − Close_{t-1}|,
    |Low_t − Close_{t-1}|
)

Purpose:

Measures real price expansion per bar

5. VTR — Volatility True Range

General Formula:

VTR_t = m × (1/l) × Σ_{i=0}^{l-1} TR_{t-i}

Image Parameters:

VTR(3,12) → medium volatility
VTR(10,1) → instant spike
VTR(11,2) → ultra-short range

Unit: Same as price

6. Market Bias Rules (VTR vs Price)

Let Price_t = Close_t

Bullish Condition:

VTR_1 > Price_t AND
VTR_2 > Price_t AND
VTR_3 > Price_t

Bearish Condition:

VTR_1 < Price_t AND
VTR_2 < Price_t AND
VTR_3 < Price_t

No Trade:

Otherwise (mixed signals)

7. Directional Movement (+DM / −DM)

Let:

upMove   = High_t − High_{t-1}
downMove = Low_{t-1} − Low_t

Formulas:

+DM_t = upMove   if upMove > downMove and upMove > 0 else 0
−DM_t = downMove if downMove > upMove and downMove > 0 else 0

8. Wilder Smoothing (for TR, +DM, −DM)

Initial value:

Smoothed_0 = Σ raw[0...n-1]

Recursive formula:

Smoothed_t = Smoothed_{t-1} − (Smoothed_{t-1} / n) + raw_t

Applied to:

TR
+DM
−DM

9. Directional Indicators (+DI / −DI)

Formulas:

+DI_t = 100 × ( +DM_smooth_t / TR_smooth_t )
−DI_t = 100 × ( −DM_smooth_t / TR_smooth_t )

10. DX — Directional Index

Formula:

DX_t = 100 × |+DI_t − −DI_t| / ( +DI_t + −DI_t )

Range: 0–100

11. DMag (ADX via Wilder)

Initial Average (Image shows):

DMag_14 = (1/14) × Σ DX

Wilder Recursion:

DMag_t = ((n − 1) × DMag_{t-1} + DX_t) / n

Purpose:

Detects trend strength only, not direction

12. Signal Strength Filter

Image Rule:

DMag > 20 AND DMag > DMag[1]

Meaning:

Trend must be stronger than 20
Trend must be accelerating

13. Full Decision Logic

Bullish Signal

VolumeBoom AND
VolumeGate AND
VTR_Bullish AND
DMag > 20 AND
DMag Rising

Bearish Signal

VolumeBoom AND
VolumeGate AND
VTR_Bearish AND
DMag > 20 AND
DMag Rising

14. Practical MT5 Notes

Prefer real_volume if broker provides it
Use shift(1) carefully
Use strict min_periods
Protect against division by zero in DI & DX

15. Mini Numeric Example

Example bar:

High_t  = 103
Low_t   = 100
Close_t = 102
Close_{t-1} = 100

TR:

max(3, 3, 0) = 3

VTR(10,1):

10 × 3 = 30

Comparison:

30 < 102 → bearish zone

16. Pitfalls

Comparing raw price to VTR assumes scale compatibility
Weak volume sessions distort Volume Boom
Early-bar smoothing instability
ADX must be Wilder-smoothed, not EMA

17. Pseudocode Summary

for each bar t:
    compute TR
    compute VTRs
    compute VolumeGate
    compute VolumeBoom
    compute +DM, -DM
    wilder_smooth(TR, +DM, -DM)
    compute +DI, -DI
    compute DX
    compute DMag (ADX)

    if all bullish conditions:
        place bullish dot
    if all bearish conditions:
        place bearish dot

18. Recommended Parameter Ranges

Parameter	Suggested Range
VG Lookback	20–100
VG Multiplier	1.0–2.0
Volume Boom Window	10–20
VTR Multipliers	2–12
ADX Period	14 (standard)
ADX Threshold	20–25

End of System Documentation