donchian-strong-regime

Donchian Strong-Regime Short

Trend-breakdown short, gated by a triple-confirmed strong-bear regime. Stays out of chop entirely. Validated on BTC/USDC:USDC over 162 days (2025-11-20 → 2026-05-01).

Searchable under: trend follower, breakdown, regime-gated, donchian short, structural break.

Backtest evidence

Window	Trades	Win rate	Profit	Max DD
Full period (162d)	6	100%	+6.69%	0%
First-half / strong bear (82d)	6	100%	+6.69%	0%
Second-half / chop (80d)	0	—	0%	0%

The triple-confirmation gate produced zero trades in the rangy second half — exactly the behavior a regime gate should produce. Every fired trade in the first half captured the trailing stop for profit.

Thesis

In a confirmed strong-bear regime (ema separation, ADX, recent momentum all aligned), a close below the 24-bar low (4 days of structure) reliably continues lower. The gate prevents the strategy from firing during sideways/rangy markets where the same signal mean-reverts.

Mechanics

• Pair: validated on BTC/USDC:USDC; expected to behave similarly on other deeply-liquid majors during their own confirmed bear regimes
• Timeframe: 4h (entry signal); 4h trend indicators (regime gate)
• Regime gate (ALL three required):
  • EMA50 / EMA200 - 1 < -0.06 (≥6% separation = deep structural downtrend, not a fresh cross)
  • ADX(14) > 25 (trend strength confirmed)
  • close.pct_change(30) < -0.10 (last 30 bars = ~5 days, actual downside momentum)
• Entry (short): close < lowest_24_bar_low AND regime gate satisfied
• Exit (any of):
  • close > highest_6_bar_high (24h ceiling break — local reversal)
  • 2 consecutive bars with RSI > 55 (sustained rebound)
  • Trailing stop fires (Phase 2 — see the dsl-exit-engine skill)
• Stops: Phase 1 hard stop at -5%; Phase 2 trailing activates at +3%, trails 2% behind peak

Full strategy code

from freqtrade.strategy import IStrategy
import pandas as pd
import talib.abstract as ta


class DonchianStrongRegimeStrategy(IStrategy):
    INTERFACE_VERSION = 3
    timeframe = "4h"
    can_short = True

    stoploss = -0.05
    trailing_stop = True
    trailing_stop_positive = 0.02
    trailing_stop_positive_offset = 0.03
    trailing_only_offset_is_reached = True

    minimal_roi = {"0": 100.0}  # disable ROI; trailing + signal exits only
    process_only_new_candles = True
    startup_candle_count = 220
    use_exit_signal = True

    def populate_indicators(self, dataframe: pd.DataFrame, metadata: dict) -> pd.DataFrame:
        dataframe["lowest_24"] = dataframe["low"].rolling(24).min().shift(1)
        dataframe["highest_6"] = dataframe["high"].rolling(6).max().shift(1)
        dataframe["ema50"] = ta.EMA(dataframe, timeperiod=50)
        dataframe["ema200"] = ta.EMA(dataframe, timeperiod=200)
        dataframe["rsi"] = ta.RSI(dataframe, timeperiod=14)
        dataframe["adx"] = ta.ADX(dataframe, timeperiod=14)

        dataframe["ema_sep"] = (
            (dataframe["ema50"] - dataframe["ema200"]) / dataframe["ema200"]
        )
        dataframe["ret_30"] = dataframe["close"].pct_change(30)
        dataframe["regime_strong"] = (
            (dataframe["ema_sep"] < -0.06)
            & (dataframe["adx"] > 25)
            & (dataframe["ret_30"] < -0.10)
        )
        return dataframe

    def populate_entry_trend(self, dataframe: pd.DataFrame, metadata: dict) -> pd.DataFrame:
        cond = (
            (dataframe["close"] < dataframe["lowest_24"])
            & dataframe["regime_strong"]
        )
        dataframe.loc[cond, "enter_short"] = 1
        dataframe.loc[cond, "enter_tag"] = "donchian_strong_bear"
        return dataframe

    def populate_exit_trend(self, dataframe: pd.DataFrame, metadata: dict) -> pd.DataFrame:
        cond = (
            (dataframe["close"] > dataframe["highest_6"])
            | ((dataframe["rsi"] > 55) & (dataframe["rsi"].shift(1) > 55))
        )
        dataframe.loc[cond, "exit_short"] = 1
        return dataframe