Z-Edge | Confluence Z-score Strategy by blitz_locked
By blitz_locked
Performance Metrics
- Author: blitz_locked
- Symbol: COINBASE:ETHUSD
- Timeframe: 1 day
- Win Rate: 38.2%
- Profit Factor: 2.691
Description
A multi-factor trading strategy that standardizes three independent market signals — momentum, RSI, and relative volume — into a single composite Z-score, then trades either trend-following or mean-reversion setups off that score. Position size and stop placement are calculated automatically from ATR-based risk, so every trade is sized consistently regardless of the asset's volatility.FeaturesMulti-factor composite — blends price momentum (rate of change), RSI, and relative volume into one Z-scored reading, with adjustable weights so you can lean the composite toward whichever factor you trust most for a given market.Adaptive smoothing — the EMA smoothing length isn't fixed. It automatically shortens in high-volatility regimes (faster response) and lengthens in calm regimes (less noise), driven by an ATR percentile rank.Two entry modes — Zero Cross (trend-following: enter when the composite crosses through zero) or Threshold Reversion (mean-reversion: enter when the composite reverses from an extreme).Divergence detection — flags when price makes a new high/low that the composite Z-score doesn't confirm, a classic early-warning signal the underlying factors alone don't show.ATR-based risk sizing — every trade's position size is calculated from your risk-per-trade %, account equity, and ATR stop distance, with a hard cap on max % of equity per position.Automatic stop-loss placement — stops are placed directly from the ATR calculation, not just displayed.How the algorithm worksFactor calculation — momentum is measured as rate-of-change over a configurable lookback, RSI uses a standard length, and relative volume is current volume divided by its moving average.Standardization — each factor is converted to a Z-score (value − mean) / stdev over a shared lookback period, making them comparable regardless of asset or scale.Composite blend — the three Z-scores are combined using your weight inputs into one composite reading.Adaptive smoothing — an ATR percentile rank (0–100) determines where the current volatility regime sits historically, and that percentile scales the EMA smoothing length between your min/max settings.Signal generation — depending on the selected mode, entries fire either on a zero-line cross (trend) or on a reversal from a threshold extreme (reversion); exits fire on the opposite condition or when the ATR stop is hit.Sizing — position size = (account equity × risk %) ÷ (ATR × stop multiplier), capped at a max % of equity.Tips for useMatch the mode to the market. Zero Cross mode is built for trending assets; Threshold Reversion is built for range-bound ones. Running the wrong mode on the wrong market condition is the most common way this underperforms.Start on the daily timeframe. Default lookbacks (100-period Z-score, 100-period ATR percentile) are sized for daily bars; shrink them proportionally for lower timeframes.Test on liquid assets. Relative volume is one of the three factors — thin, erratic volume data will make the composite noisier.Backtest across a full cycle. Use at least 2+ years of data spanning both trending and ranging periods so you're not fitting to one regime.Watch the % of equity cap. On very low-volatility assets, ATR-based sizing can push toward very large positions; the equity cap prevents unrealistic leverage but will also silently reduce your intended risk-per-trade when it kicks in — check the info table to see when that's happening.Divergence is a filter, not a standalone signal. It's most useful for skipping or flagging entries near likely reversals, not as an independent trigger.