Strategy Archetypes Catalog
Eight canonical strategy archetypes cover the primary systematic trading approaches. Each archetype defines default modules, typical failure modes, and compatible pivot targets.
1. Trend Following Breakout (trend_following_breakout)
Description: Buy when price breaks above a consolidation range with volume confirmation. Ride the trend with trailing stops.
Default Modules:
- hypothesis_type: breakout
- mechanism_tag: behavior
- entry_family: pivot_breakout
- horizon: medium (10-60 days)
- risk_style: wide (trailing stop 8-12%)
Typical Failure Modes:
- Whipsaws in range-bound markets
- Late entries after extended moves
- Gap-downs through stop levels
Compatible Pivots From: mean_reversion_pullback, volatility_contraction, sector_rotation_momentum
2. Mean Reversion Pullback (mean_reversion_pullback)
Description: Buy oversold pullbacks within an established uptrend. Profit from reversion to mean.
Default Modules:
- hypothesis_type: mean_reversion
- mechanism_tag: statistical
- entry_family: research_only
- horizon: short (3-14 days)
- risk_style: tight (stop 3-5%)
Typical Failure Modes:
- Catching falling knives in trend changes
- Insufficient recovery within time stop
- Sector-wide selloffs overwhelming individual stock mean reversion
Compatible Pivots From: trend_following_breakout, volatility_contraction, earnings_drift_pead
3. Earnings Drift PEAD (earnings_drift_pead)
Description: Exploit post-earnings announcement drift by entering after significant earnings surprises.
Default Modules:
- hypothesis_type: earnings_drift
- mechanism_tag: information
- entry_family: gap_up_continuation
- horizon: medium (5-30 days)
- risk_style: normal (stop 5-8%)
Typical Failure Modes:
- One-day gap fills that reverse the drift
- Market-wide selloffs overwhelming individual stock drift
- Late entry after drift has already occurred
Compatible Pivots From: event_driven_fade, trend_following_breakout, mean_reversion_pullback
4. Volatility Contraction (volatility_contraction)
Description: Enter when volatility contracts to historical lows (VCP pattern), anticipating expansion in the trend direction.
Default Modules:
- hypothesis_type: breakout
- mechanism_tag: structural
- entry_family: pivot_breakout
- horizon: medium (10-40 days)
- risk_style: tight (stop 3-6%)
Typical Failure Modes:
- False breakouts from contraction zones
- Extended contraction periods draining capital via time stops
- Volatility expanding in the wrong direction
Compatible Pivots From: trend_following_breakout, mean_reversion_pullback, statistical_pairs
5. Regime Conditional Carry (regime_conditional_carry)
Description: Hold positions only during favorable macro regimes, using regime detection to filter entries.
Default Modules:
- hypothesis_type: regime
- mechanism_tag: macro
- entry_family: research_only
- horizon: long (30-120 days)
- risk_style: normal (stop 5-8%)
Typical Failure Modes:
- Regime detection lag causing late entries/exits
- Whipsaws during regime transitions
- Underperformance during trending markets due to conservative entry timing
Compatible Pivots From: sector_rotation_momentum, event_driven_fade, statistical_pairs
6. Sector Rotation Momentum (sector_rotation_momentum)
Description: Rotate into sectors showing relative strength momentum, exit when momentum fades.
Default Modules:
- hypothesis_type: momentum
- mechanism_tag: behavior
- entry_family: research_only
- horizon: medium (20-60 days)
- risk_style: normal (stop 5-8%)
Typical Failure Modes:
- Momentum reversals during sector rotation shifts
- Crowded trades in popular sectors
- Correlation spikes during market stress nullifying diversification
Compatible Pivots From: trend_following_breakout, regime_conditional_carry, earnings_drift_pead
7. Event Driven Fade (event_driven_fade)
Description: Fade overreactions to scheduled or unscheduled events, betting on mean reversion after the initial move.
Default Modules:
- hypothesis_type: mean_reversion
- mechanism_tag: information
- entry_family: research_only
- horizon: short (1-10 days)
- risk_style: tight (stop 2-5%)
Typical Failure Modes:
- Events that represent genuine regime changes (not overreactions)
- Cascading events that compound the initial move
- Liquidity gaps during extreme events
Compatible Pivots From: earnings_drift_pead, mean_reversion_pullback, volatility_contraction
8. Statistical Pairs (statistical_pairs)
Description: Trade cointegrated pairs, going long the undervalued and short the overvalued member when spread deviates from equilibrium.
Default Modules:
- hypothesis_type: mean_reversion
- mechanism_tag: statistical
- entry_family: research_only
- horizon: medium (10-30 days)
- risk_style: normal (stop via z-score threshold)
Typical Failure Modes:
- Cointegration breakdown due to fundamental changes
- Extended spread divergence exceeding risk limits
- Execution risk on short leg (borrow costs, locate difficulty)
Compatible Pivots From: mean_reversion_pullback, volatility_contraction, regime_conditional_carry
Archetype Compatibility Matrix
| Source Archetype | Compatible Pivot Targets |
|---|---|
| trend_following_breakout | mean_reversion_pullback, volatility_contraction, sector_rotation_momentum |
| mean_reversion_pullback | trend_following_breakout, volatility_contraction, earnings_drift_pead |
| earnings_drift_pead | event_driven_fade, trend_following_breakout, mean_reversion_pullback |
| volatility_contraction | trend_following_breakout, mean_reversion_pullback, statistical_pairs |
| regime_conditional_carry | sector_rotation_momentum, event_driven_fade, statistical_pairs |
| sector_rotation_momentum | trend_following_breakout, regime_conditional_carry, earnings_drift_pead |
| event_driven_fade | earnings_drift_pead, mean_reversion_pullback, volatility_contraction |
| statistical_pairs | mean_reversion_pullback, volatility_contraction, regime_conditional_carry |