White Light
Risk-managed returns through composite signal analysis
A 7-signal momentum system that reads trend, momentum, volatility, and mean reversion — then positions accordingly. No emotion. No discretion. Just signals.
How It Works
Seven independent sub-strategies each answer a different question about the market. Their weighted composite score drives allocation decisions — no single indicator can fool the system.
| Signal | Name | Weight | Question It Answers |
|---|---|---|---|
| S1 | Primary Trend | 25% | Where are we in the big picture? (SMA 50/250) |
| S2 | Intermediate Trend | 15% | Is the medium-term confirming? (SMA 20/100) |
| S3 | Short-Term Trend | 10% | What's happening right now? (SMA 5/20) |
| S4 | Trend Strength | 10% | How strong is the current move? (60d regression slope) |
| S5 | Momentum Velocity | 15% | Is momentum accelerating or decelerating? (ROC derivative) |
| S6 | Bollinger Mean Reversion | 15% | Are we stretched too far? (Bollinger %B + macro filter) |
| S7 | Volatility Regime | 10% | Is the environment safe for leverage? (Vol ratio 20d/60d) |
Volatility-Targeted Sizing
Position size scales inversely with realized volatility. When BTC vol is 80%, size down. When it's 40%, size up. This ensures consistent risk exposure regardless of market regime.
TQQQ / BIL Rotation
Leveraged NASDAQ exposure managed by momentum signals. Rotates between 3× long (TQQQ), 3× short (SQQQ), and T-Bills (BIL) based on NDX composite score. Daily execution at 3:35 PM ET.
Grid search across 42 threshold combinations. Optimized for Sharpe ratio.
Backtest Performance
| Period | Total Return | CAGR | Max DD | Sharpe | Sortino | Win Rate |
|---|---|---|---|---|---|---|
| 15yr (2011–2026) | 11,752% | 37.5% | -52.1% | 0.82 | 0.78 | 74.2% |
| 5yr (2021–2026) | 447% | 39.4% | -51.1% | 0.82 | 0.79 | 62.3% |
| 3.5yr (2022–2026) | 168% | 31.9% | -51.5% | 0.72 | 0.69 | 57.4% |
| 1yr (2025–2026) | 15.4% | 15.6% | -43.5% | 0.46 | 0.42 | 48.4% |
Monte Carlo Simulation — 500 Random Windows
| Holding Period | Median CAGR | 5th Pctl | 95th Pctl | Median Max DD | Median Sharpe |
|---|---|---|---|---|---|
| Overall | 32.9% | 18.9% | 47.4% | -38.1% | 0.95 |
| 1–2 years | 35.3% | -10.6% | 92.4% | -27.5% | 0.96 |
| 3–5 years | 32.5% | 21.5% | 46.6% | -34.7% | 0.94 |
| 5–8 years | 34.3% | 26.3% | 42.3% | -38.1% | 0.99 |
| 8–12 years | 32.5% | 28.6% | 37.9% | -38.1% | 0.94 |
Wins 91% of random time windows vs. unmanaged TQQQ. Returns narrow with longer holding periods — the system is consistent, not lucky.
BTC & ETH — Vol-Targeted
The same 7-signal framework applied to crypto markets with volatility-targeted position sizing. 4-hour execution cycle, 24/7. Trades CAGR for dramatically better risk-adjusted returns.
₿Bitcoin
Buy & hold delivers higher CAGR but with 83.4% max drawdown. White Light cuts drawdown by 77% while maintaining a superior Sharpe ratio.
ΞEthereum
ETH White Light nearly doubles the Sharpe (1.24 vs 0.64) while cutting max drawdown from 83% to 21%.
Monte Carlo — 1,000 Simulations
| Metric | BTC White Light | BTC Buy & Hold | ETH White Light | ETH Buy & Hold |
|---|---|---|---|---|
| Median CAGR | 27.0% | 73.9% | 18.3% | 54.9% |
| Median Sharpe | 1.568 | 1.156 | 1.279 | 0.952 |
| Median Max DD | 19.3% | 83.4% | 18.4% | 79.4% |
| Beats B&H Sharpe | 89.0% | — | 93.9% | — |
| Beats B&H MaxDD | 100.0% | — | 100.0% | — |
The key insight: White Light beats buy-and-hold on Sharpe ratio in 89–94% of random windows and beats on max drawdown in 100% of simulations. You trade raw upside for the ability to sleep at night.
BlackLightMC v2
The evolution of Market Cipher — a 5-strategy composite system with Money Flow as the master filter. BlackLight achieves the highest Sharpe ratio (1.868) and lowest drawdown (15.4%) of any strategy tested.
The key edge: Money Flow as a master filter suppresses 70% of counter-trend signals, while EMA ribbon confirmation provides adaptive regime detection.
Five Entry Strategies
White Line Cut on Trigger Wave
Primary momentum trigger — EMA crossover on the trigger wave oscillator. The highest-confidence entry signal.
VWAP Strong Curve Cross
Volume-weighted average price deviation crossover. Confirms institutional participation in the move.
Money Flow Zero-Line Cross
Capital flow direction change. When money flow crosses zero, institutional conviction has shifted.
Multi-Timeframe Alignment
Confirms signals across multiple timeframes. Prevents entering on noise — requires structural agreement.
Divergence + Volume
Price-momentum divergence confirmed by volume spike. Catches bottoms and tops with high precision.
Money Flow Master Filter
Overrides all entry signals when capital flow opposes the trade. Suppresses 70% of counter-trend false signals before they execute.
System Configuration
Asymmetric thresholds: +0.20 bull / -0.10 bear — faster to exit risk, slower to enter. EMA ribbon alignment provides ±20% signal boost.
Three-Way BTC Comparison
Head-to-head backtest on BTC daily data from 2014–2026. 4,181 bars, 0.25% trading fees, volatility-targeted position sizing.
BlackLight (MC v2) wins decisively on risk-adjusted returns with a +0.38 Sharpe margin over both competitors and the lowest max drawdown.
| Metric | White Light | Market Cipher v1 | ⚡ BlackLight (MC v2) |
|---|---|---|---|
| Sharpe Ratio | 1.490 | 1.485 | 1.868 |
| CAGR | 25.0% | 31.8% | 27.8% |
| Max Drawdown | 20.4% | 29.6% | 15.4% |
| Total Return | 11.1× | 19.5× | 14.1× |
| Total Trades | 255 | 119 | — |
White Light
Pure price-based 7-signal system. Conservative, reliable. Sharpe 1.490 with 20.4% max drawdown.
Market Cipher v1
Volume-weighted signals. Highest raw return (19.5×) but with 29.6% drawdown and fewest trades.
BlackLight (MC v2)
WinnerBest of both worlds. Sharpe 1.868 — 25% better than either competitor. Lowest drawdown at 15.4%.
Why BlackLight wins: The Money Flow master filter eliminates 70% of false signals before they execute. Combined with adaptive vol-regime thresholds and EMA ribbon confirmation, BlackLight achieves +0.38 Sharpe improvement over both White Light and MC v1 — while simultaneously delivering the lowest drawdown of any strategy tested.
Architecture
Signal Engine
Python-based signal computation on NDX/BTC/ETH price data. 7 sub-strategies produce continuous scores from -1.0 to +1.0, combined via weighted composite.
Data Pipeline
Polygon.io for historical daily data (cached as Parquet). Alpaca for live quotes and crypto OHLCV. Intraday NDX via yfinance for pre-close signals.
Execution
Alpaca brokerage for both equity and crypto. Market orders near close. Sells before buys. 5% rebalance threshold prevents over-trading (~1 trade per 16 days).
Risk Management
| Rule | Limit | Rationale |
|---|---|---|
| Max TQQQ allocation | 50% | Caps maximum leveraged exposure |
| Max SQQQ allocation | 30% | Inverse ETFs decay faster |
| SQQQ time limit | 15 trading days | Prevents leverage decay erosion |
| No direct flip | 1 day cash buffer | Prevents catastrophic whipsaw on 3× leverage |
| Execution window | 3:30–3:59 PM ET | Skips entirely if delayed — no stale signals |
| ATR trailing stop | 2.5× ATR | Dynamic stop-loss that adapts to volatility |