Nour AI Strategy: ZigZag Market Structure Trading Guide 2026

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Table of Contents

1. What is the Nour AI Strategy?
2. Market Structure Detection
3. Angle Validation System
4. Three-Tiered Entry System
5. Stop Loss and Risk Management
6. Trading Strategies
7. Configuration Guide
8. Common Mistakes
9. FAQ

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What is the Nour AI Strategy?

The Nour AI Strategy is an algorithmic trading system that uses ZigZag-based market structure analysis to identify high-probability reversal opportunities. Unlike traditional pivot strategies, Nour AI requires specific Lower High to Higher Low (LH→HL) sequences with geometric angle confirmation before executing trades.

Core Components

1. ZigZag Market Structure Detection: Automated pivot identification using deviation-based reversal recognition
2. Pivot Classification System: Real-time labeling of HH, HL, LH, LL patterns
3. Angle Validation Engine: Geometric filtering that rejects steep patterns based on degree measurements
4. Three-Tiered Entry Framework: Direct breakout, reversal breakout, and reverse-on-loss modes

Key Features

• Automated Pattern Recognition: ZigZag library with configurable parameters
• Geometric Filtering: Angle calculation prevents steep consolidations producing false breakouts
• Flexible Entry Modes: Three execution systems for varying market conditions
• Professional Metrics: Profabighi Capital integration for Sharpe, Sortino, Jensen's Alpha
• Visual Confirmation: HH/HL/LH/LL labels with directional background highlighting

Why Use Nour AI Strategy?

1. Eliminates Premature Entries: Requires specific LH→HL sequence, not just any consolidation
2. Filters Noise: Angle validation rejects patterns with historically poor success rates
3. Adapts to Conditions: Three-tiered system handles momentum, reversal, and recovery scenarios
4. Risk-Optimized: Configurable SL placement with percentage buffer adjustment
5. Multi-Asset Application: Works across crypto, forex, futures with parameter optimization

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Market Structure Detection

Market structure forms the foundation of institutional trading analysis. The Nour AI Strategy automates this through ZigZag-based pivot detection and classification.

ZigZag Detection Parameters

Price Deviation (%): Minimum price movement to confirm a new pivot

• Lower values (0.1-0.3%): More pivots, suitable for 5m-15m timeframes
• Medium values (0.4-0.7%): Balanced detection for 1H-4H timeframes
• Higher values (0.8-2.0%): Major structure for Daily-Weekly timeframes

Pivot Legs: Bars to lookback for pivot confirmation

• Lower (1-2): Faster confirmation with potential repainting
• Medium (3-5): Balanced confirmation with reduced repainting
• Higher (6-10): Delayed but highly reliable detection

Market Structure Classifications

Higher High (HH)

• Current high > Previous high
• Signals bullish continuation
• Green labels above price

Higher Low (HL)

• Current low > Previous low
• Confirms bullish support
• Green labels below price

Lower High (LH)

• Current high < Previous high
• Signals bearish development
• Red labels above price

Lower Low (LL)

• Current low < Previous low
• Confirms bearish trend
• Red labels below price

Directional Background

• Bullish (Green): After HL formation
• Bearish (Red): After LH formation
• Adjustable transparency: Default 80% to prevent clutter

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Angle Validation System

Angle validation is the core innovation, filtering consolidation patterns based on geometric properties correlating with breakout reliability.

The Problem with Steep Patterns

Traditional strategies trigger on any LH→HL sequence without considering time. This fails when:

• Rapid consolidation creates whipsaw structure labels
• News spikes generate sharp moves with quick reversals
• Low volume wicks create false pivots

Research shows patterns with angles exceeding 70-80° have failure rates above 65%.

Angle Calculation

When an HL pivot forms after LH, the strategy calculates:

Price Change = Absolute(LH Price - HL Price)
Bar Change = HL Bar Index - LH Bar Index
Angle (Degrees) = arctan(Price Change / Bar Change) × (180 / π)

Example:

• LH at 50,000 on bar 100
• HL at 48,000 on bar 110
• Angle = arctan(2,000 / 10) ≈ 89.7° (rejected as too steep)

Maximum Angle Threshold

Conservative (30-50°): Very shallow consolidations, higher reliability, fewer signals
Moderate (50-70°): Balanced geometry, good reliability, adequate signals
Aggressive (70-90°): Steeper patterns, more signals, lower reliability

Wait Period Validation

After initial calculation:

1. Pattern enters pending queue
2. Each bar increments wait counter
3. Angle rechecked during wait period
4. After threshold reached, box creation confirms

Wait Bars setting (default: 4):

• Ensures angle stability
• Prevents premature creation from repainting
• Provides time for market confirmation

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Three-Tiered Entry System

The flexibility of Nour AI comes from three distinct entry modes handling different market conditions.

Tier 1: Direct Breakout Entry

Activation: First candle after box creation closes outside box
Philosophy: Capture strong momentum without retest

Process:

1. Box validates on bar N
2. Bar N+1 closes outside box
3. Entry triggers at close
4. SL calculated from box dimensions
5. TP set using R/R ratio

Advantages: Captures explosive moves, no waiting
Disadvantages: Higher false breakout risk
Best For: Lower timeframes (5m-1H), trending markets, crypto volatility

Tier 2: Reversal Breakout Entry

Activation: After breakout → reversal → re-breakout sequence
Philosophy: Require proof of commitment through retest

Process:

1. Initial Breakout: Close outside box (doesn't trigger entry)
2. Reversal Detection: Price returns into box (close OR wick)
3. Candle Counting: Track bars touching box, invalidate if exceeds max
4. Re-Breakout Entry: Close outside box again triggers entry

Advantages: Filters false breakouts, confirms institutional interest
Disadvantages: Misses moves without retest
Best For: All timeframes, range-bound markets, confirmation priority

Max Candles in Box setting:

• Prevents entries after extended consolidation
• 2-3 for conservative, 3-5 for aggressive

Tier 3: Reverse on Loss Entry

Activation: Original trade hits SL before TP
Philosophy: Transform losing trades into recovery opportunities

Process:

1. Original trade reaches SL (not TP)
2. New trade opens OPPOSITE direction
3. Reverse Entry = Original SL
4. Reverse SL = Original Entry
5. Reverse TP = Entry ± (Entry - SL) × R/R

Example - Long Reverses:

• Original: Long 50,000 | SL 49,000 | TP 52,000
• Reverse: Short 49,000 | SL 50,000 | TP 47,000

Advantages: Captures momentum from failed direction
Disadvantages: Adds to losses if whipsaw continues
Protection: Maximum 3 reverse iterations (default)

Enable Reverse on Loss (default: false):

• Advanced feature requiring backtesting
• Disable if reverse win rate < 40%

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Stop Loss and Risk Management

Professional risk management distinguishes profitable strategies from account-destroying systems.

Stop Loss Placement Options

SL at Box Middle (Default)

• Long: SL = (Top + Bottom) / 2 - Buffer
• Short: SL = (Top + Bottom) / 2 + Buffer
• Advantages: Smaller SL, larger positions, better R/R
• Disadvantages: Higher stop-out from wicks

SL at Box Edge

• Long: SL = Bottom - Buffer
• Short: SL = Top + Buffer
• Advantages: Lower stop-out rate, more room
• Disadvantages: Larger SL, worse R/R

SL Buffer Adjustment

Positive Buffer (+10% to +25%): Moves SL away from entry (more room)
Zero Buffer (0%): No adjustment
Negative Buffer (-10% to -25%): Moves SL closer (tighter)

Example - Long Trade:

• Box Top: 51,000 | Bottom: 49,000 | Middle: 50,000
• +10% Buffer: SL moves to 49,900 (100 points further from entry)

Take Profit Calculation

Risk/Reward Ratio (default: 2.0):

Long: TP = Entry + (Entry - SL) × R/R
Short: TP = Entry - (SL - Entry) × R/R

Optimal R/R by Mode:

• Direct Breakout: 2:1 to 3:1
• Reversal Breakout: 1.5:1 to 2:1
• Reverse on Loss: 2:1 minimum

Position Sizing

Strategy uses 100% of equity by default (assumes leverage):

• For spot trading: Manually adjust to 10-25%
• For conservative: Use 1-5% risk per trade
• Pyramiding = 1: Maximum 1 active position

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Trading Strategies

The Nour AI Strategy adapts to various styles through parameter optimization.

Strategy 1: Swing Trading (Daily/4H)

Configuration:

• Price Deviation: 0.7-1.0%
• Pivot Legs: 3-5
• Max Angle: 60-70°
• Wait Bars: 4-6
• Direct Breakout: False
• SL at Box Edge: True
• R/R Ratio: 2:1

Best For: Bitcoin/Ethereum majors, Forex majors, large-cap stocks

Strategy 2: Day Trading (1H/15m)

Configuration:

• Price Deviation: 0.3-0.5%
• Pivot Legs: 2-3
• Max Angle: 70-90°
• Wait Bars: 2-3
• Direct Breakout: True
• SL at Box Edge: False
• R/R Ratio: 2:1 to 3:1

Best For: High-volume crypto pairs, Forex during active sessions, Index futures

Strategy 3: Crypto Volatility Trading

Configuration:

• Price Deviation: 0.5-0.8%
• Pivot Legs: 2-4
• Max Angle: 75-85°
• Wait Bars: 3-4
• Direct Breakout: True
• Reverse on Loss: True (Max 2)
• SL Buffer: +15% to +20%
• R/R Ratio: 2:1 to 2.5:1

Best For: Altcoin majors (SOL, BNB, XRP), mid-cap coins with volume

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Configuration Guide

Parameter Optimization by Timeframe

Entry Mode Selection

Test Period: 12 months minimum
Metrics to Compare: Win Rate, Avg R/R, Max Drawdown, Sharpe Ratio

Decision Matrix:

• If Win Rate > 55% with Reversal → Disable Direct Breakout
• If Direct Breakout Sharpe > Reversal Sharpe → Enable Direct
• If Reverse-on-Loss Win Rate < 40% → Disable feature

Backtesting Best Practices

Data Requirements:

• Minimum: 6 months historical data
• Recommended: 12-24 months
• Include multiple market conditions

Key Metrics from Profabighi Capital:

• Sharpe Ratio > 1.5: Excellent risk-adjusted returns
• Sortino Ratio > 2.0: Strong downside protection
• Jensen's Alpha > 0: Outperformance vs benchmark
• Win Rate: 45-60% target
• Maximum Drawdown: < 25%

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Common Mistakes

Mistake 1: Ignoring Angle Validation

Error: Setting Max Angle too high (>85°) or disabling validation
Impact: Steep patterns have 65%+ failure rates
Fix: Set Max Angle between 60-75° for most markets

Mistake 2: Mismatching Timeframes

Error: Using 5-minute with 1.5% deviation and 5 pivot legs
Impact: Almost no pivots detected, massive delays
Fix: Use parameter table - lower timeframes need lower deviation (0.2-0.4%)

Mistake 3: Enabling All Entry Modes

Error: Direct Breakout + Reverse on Loss without testing
Impact: Whipsaw cascade through correlated losses
Fix: Test each mode independently, combine only after validation

Mistake 4: Neglecting SL Buffer in Crypto

Error: Using 0% buffer on volatile altcoins
Impact: 2-20% wicks stop out positions before reversal
Fix: Crypto pairs need +15% to +25% buffer

Mistake 5: Ignoring Max Candles in Box

Error: Setting too high (8-10) or too low (1-2)
Impact: Late entries or premature invalidations
Fix: Trending markets 2-3, ranging markets 3-5

Mistake 6: Over-Optimization

Error: Testing 50+ combinations, selecting best historical
Impact: Curve fitting - great backtest, terrible live results
Fix: Test sensible ranges only, verify on out-of-sample data

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Frequently Asked Questions

What is the Nour AI Strategy?

The Nour AI Strategy is an algorithmic system using ZigZag-based market structure analysis to identify reversals through angle-validated pattern recognition. It automates HH/HL/LH/LL classification, creating trades when specific LH→HL sequences form with geometric confirmation.

How does angle validation work?

Angle validation calculates the angle between LH and HL pivots using arctangent. Steep patterns (>70-80°) historically produce false breakouts 65%+ of the time. By rejecting patterns exceeding the maximum threshold, win rate improves by 10-15%.

What's the difference between the three entry modes?

Direct Breakout: Immediate entry on first candle closing outside box (momentum)
Reversal Breakout: Requires breakout → reversal → re-breakout (confirmation)
Reverse on Loss: Opens opposite direction when SL hits (recovery)

Should I enable reverse-on-loss?

Only after backtesting shows reverse trades have 40%+ win rates and Sharpe > 1.0. Conservative traders should keep disabled. If enabling, set Max Reverse Count to 2-3.

What stop loss placement is better?

Box Edge: Larger stops, lower stop-out rate - best for volatile crypto
Box Middle: Smaller stops, higher stop-out rate - best for liquid forex/BTC

Test both on your market. Higher win rate with middle suggests clean structure.

What's the optimal risk/reward ratio?

Depends on entry mode:

• Direct Breakout: 2:1 to 3:1
• Reversal Breakout: 1.5:1 to 2:1
• Reverse on Loss: 2:1 minimum

Test from 1.5:1 to 3:1, choose ratio with maximum expectancy.

Can this strategy work for cryptocurrency?

Yes, particularly effective due to clear structure and volatility. Adjustments:

• Max Angle: 75-85° (crypto forms steeper patterns)
• SL Buffer: +15% to +25% (account for wicks)
• Direct Breakout: True (capture momentum)
• R/R: 2:1 to 2.5:1

What are optimal ZigZag settings?

Depends on timeframe (see parameter table in Configuration section). General guidelines:

• Lower timeframes: 0.2-0.4% deviation, 2-3 pivot legs
• Higher timeframes: 0.7-1.2% deviation, 4-5 pivot legs

Test settings to ensure 20-40 pivots per 100 bars.

How do I optimize parameters?

1. Select baseline from timeframe table
2. Run 12-month backtest
3. Test variations one at a time (±10° angle, ±1 candles, ±0.25 R/R)
4. Compare Sharpe ratios
5. Verify with 3-month forward test

Avoid testing all combinations (curve fitting risk).

What Profabighi Capital metrics matter most?

Critical Metrics:

• Sharpe Ratio > 1.5
• Maximum Drawdown < 25%
• Jensen's Alpha > 0
• Win Rate: 45-60%

Monitor equity curve shape - smooth upward trajectory preferred.

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Conclusion

The Nour AI Strategy provides a sophisticated approach to algorithmic market structure trading. By requiring specific LH→HL sequences with angle confirmation, it filters false signals plaguing traditional approaches. The three-tiered entry system adapts across conditions, while professional risk management maintains capital preservation.

Success requires systematic optimization for your market, timeframe, and risk tolerance. Use the backtesting framework and parameter tables to discover optimal settings. Monitor Profabighi Capital metrics continuously, adjusting as conditions evolve.

Start conservatively (reversal breakout only, box edge stops), master the mechanics, then explore advanced features after establishing consistent profitability.

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Last Updated: January 2026