COMPRESSION PATTERN
Volatility contraction
A sequence of shrinking ranges or volatility estimates before potential expansion.
Rules visible before the outcome
- ATR, true range or swing width declines by a fixed rule
- A minimum contraction duration is met
- Liquidity and session filters are set
02 / CONFIRMATION
When the idea becomes eligible
Expansion and close beyond the contraction boundary.
03 / INVALIDATION
What proves it wrong
Return into the structure or failure to expand within a time limit.
The attractive mistake
Contraction can continue and breakouts can reverse after transaction costs.
Make it falsifiable
Measure direction-neutral breakouts and include a maximum waiting period.
1Freeze the geometry
2Timestamp eligibility
3Count every outcome
4Test unseen data