Signal Generation and Validation

This document covers the signal generation and validation system, which is responsible for determining when to create new trading signals and when to close existing ones. The system implements automated validation rules based on technical analysis indicators, price movements, and timing constraints to ensure safe and profitable trading decisions.

For information about signal execution and management after validation, see Signal Logic and Management. For details on the automated job processing that triggers signal validation, see Automated Job Processing.

Purpose and Scope

The signal validation system acts as the decision-making engine that determines whether trading signals should be executed or resolved. It analyzes market conditions, existing positions, and technical indicators to make data-driven trading decisions while implementing risk management rules to prevent losses.

Signal Data Structure

The system works with standardized signal data structures that define the properties and state of trading signals:

Property	Type	Description
symbol	string	Trading pair (e.g., "BTCUSDT")
quantity	number	Amount to trade
buyPrice	number	Entry price for the position
sellPrice	number	Target exit price
stopLossPrice	number	Stop loss price (optional)
possibilityPercent	number	Confidence percentage (optional)
resolved	boolean	Whether signal is closed
ignore	boolean	Whether to ignore this signal
date	Date	Signal creation timestamp
comment	string	Additional information

Signal Validation Logic

Execute Validation

The validateExecute method determines whether a new trading signal should be created. It implements multiple validation layers:

The validation process includes:

1. Time-based constraints: Prevents rapid signal generation by enforcing waiting periods based on price movement direction
2. Technical analysis validation: Uses EMA signals to confirm market conditions favor buying
3. Price range conflicts: Ensures new signals don't interfere with existing active positions

EMA Signal Analysis

The system analyzes EMA (Exponential Moving Average) signals to determine market sentiment:

The validateShouldExecute function implements these rules:

• Requires at least 1 strong BUY signal OR 1 medium BUY + 2 additional signals
• Calculates weighted strength scores for BUY vs SELL signals
• Only executes when BUY strength exceeds SELL strength

Resolve Validation

The validateResolve method determines when to close existing positions:

The resolution logic:

• Calculates current revenue based on market price vs entry price
• Compares against minimum required revenue (based on CC_LADDER_TRADE_REVENUE)
• Only resolves signals that have reached profitability targets

Configuration Parameters

The validation system uses several configuration parameters to control trading behavior:

Parameter	Purpose	Effect
CC_LADDER_FAIL_HOURS	Price fall timeout	Prevents rapid reentry after price drops
CC_LADDER_GROWTH_HOURS	Price growth timeout	Prevents rapid reentry after price rises
CC_LADDER_STEP_PERCENT	Price range buffer	Prevents overlapping signal ranges
CC_LADDER_TRADE_REVENUE	Minimum profit threshold	Defines when to close profitable positions

These parameters implement a "ladder" trading strategy that spaces out entries and ensures minimum profit margins.

Integration Points

The validation system integrates with several other components:

• Technical Analysis Services: Uses ShortRangeMathService for EMA signal analysis
• Market Data: Integrates with BinanceService for real-time price and exchange information
• Signal Database: Stores and retrieves signal data through SignalDbService
• Price Formatting: Uses roundTicks utility for proper price precision

This system forms the core decision-making engine that determines when and how trading signals are executed and resolved within the broader trading platform.