Market Regime Detection
How QSA classifies market conditions in real-time
The 3 Regimes
QUIET
“Compression precedes expansion. When markets are quiet, breakout signals are highest conviction.”
Low ATR, tight ranges, and reduced volatility. QUIET regimes often precede significant directional moves. Breakout and compression scanners are most reliable in these conditions because the energy stored during consolidation tends to release in powerful expansions.
NORMAL
“Standard market conditions. All scanner categories perform within expected parameters.”
Average volatility with typical price action. Most scanners are calibrated for NORMAL conditions, so confidence grades are neither boosted nor penalized. This is the baseline regime where all scanner categories function as designed.
CHAOS
“Volatile, unpredictable conditions. Confidence scores are regime-adjusted downward. Risk management critical.”
High ATR, extreme volatility, wide wicks, and rapid directional changes. CHAOS regimes produce more false signals across all scanner categories. QSA automatically reduces confidence scores during CHAOS to reflect the lower reliability of detected patterns.
How Regime Is Calculated
QSA evaluates 5 independent factors to classify the current market regime. Each factor contributes a weighted vote toward QUIET, NORMAL, or CHAOS. The regime with the strongest composite signal wins.
ATR Percentile
The 14-period Average True Range is ranked against the trailing 90-day distribution. An ATR above the 80th percentile pushes toward CHAOS; below the 20th percentile pushes toward QUIET.
Return Dispersion
Measures the standard deviation of recent bar-to-bar returns. High dispersion indicates erratic price action typical of CHAOS regimes. Low dispersion signals the compression characteristic of QUIET markets.
Wick Ratio
Calculates the average ratio of wick length to body length across recent candles. Elevated wick ratios indicate rejection and indecision, often associated with CHAOS conditions.
Volume Surge
Compares current volume against the 20-period moving average. Volume spikes above 2.5x average contribute to CHAOS classification. Unusually low volume supports a QUIET regime reading.
Funding Extremity
Evaluates perpetual futures funding rates relative to their 30-day range. Extreme positive or negative funding rates indicate crowded positioning and contribute to a CHAOS regime classification.
Regime Impact on Grades
The detected regime applies a multiplier to every confidence score. This ensures grades reflect not just pattern quality but also the reliability of patterns under current market conditions.
Example Calculations
A breakout scanner fires with a raw score of 82. QUIET multiplier applied: 82 x 1.10 = 90. Grade jumps from A to S.
The same scanner fires with a raw score of 92. CHAOS multiplier applied: 92 x 0.75 = 69. Grade drops from S to B.
Trading Implications
QUIET
- •Breakout and compression scanners at highest conviction
- •Tighter stop-losses appropriate (lower ATR = less noise)
- •Watch for volume spikes as the catalyst for regime transition
- •Consider position building before the expansion phase
NORMAL
- •All scanner categories function within expected parameters
- •Standard position sizing and stop-loss distances
- •Both trend-following and mean-reversion setups are viable
- •Monitor regime indicators for potential transition signals
CHAOS
- •Reduce position sizes — wider stops needed for higher ATR
- •Mean reversion scanners may outperform trend-following
- •Expect more false breakouts and failed patterns
- •Risk management is paramount — protect capital first
Disclaimer: QuantScan AI is an informational tool only. Nothing presented on this platform constitutes financial advice, investment advice, or a recommendation to open any LONG or SHORT position. Market regime classification is based on quantitative indicators and may change rapidly. Cryptocurrency trading involves substantial risk of loss. Past scanner performance does not guarantee future results. Always do your own research and consult a qualified financial advisor before making trading decisions.