trading_bot_v4/SIGNAL_QUALITY_SETUP_GUIDE.md

Signal Quality Scoring System - Setup Guide

Overview

The signal quality scoring system evaluates every trade signal based on 5 market context metrics before execution. Signals scoring below 91/100 are automatically blocked. This prevents overtrading and filters out low-quality setups.

Threshold History:

• Nov 21 morning: Raised to 81 after v8 initial success (94.2 avg quality, 66.7% WR)
• Nov 21 evening: Raised to 91 after trade #7 loss (ADX 19.0, quality 90, -$387)

Data Validation (7 v8 trades): Perfect quality score separation validates 91 threshold:

• ALL 4 winners: Quality ≥95 (scores: 95, 95, 100, 105) ✅
• ALL 3 losers: Quality ≤90 (scores: 80, 90, 90) ❌
• Conclusion: 91 threshold would have prevented 100% of losses (-$624.90 total)

✅ Completed Components

1. TradingView Indicator ✅

• File: workflows/trading/moneyline_v5_final.pinescript
• Status: Complete and tested
• Metrics sent: ATR%, ADX, RSI, Volume Ratio, Price Position
• Alert format: SOL buy .P 15 | ATR:1.85 | ADX:28.3 | RSI:62.5 | VOL:1.45 | POS:75.3

2. n8n Parse Signal Enhanced ✅

• File: workflows/trading/parse_signal_enhanced.json
• Status: Complete and tested
• Function: Extracts 5 context metrics from alert messages
• Backward compatible: Works with old format (metrics default to 0)

3. Trading Bot API ✅

• check-risk endpoint: Scores signals 0-100, blocks if <60
• execute endpoint: Stores context metrics in database
• Database schema: Updated with 5 new fields
• Status: Built, deployed, running

📋 n8n Workflow Update Instructions

Step 1: Import Parse Signal Enhanced Node

1. Open n8n workflow editor
2. Go to "Money Machine" workflow
3. Click the "+" icon to add a new node
4. Select "Code" → "Import from file"
5. Import: /home/icke/traderv4/workflows/trading/parse_signal_enhanced.json

Step 2: Replace Old Parse Signal Node

Old Node (lines 23-52 in Money_Machine.json):

{
  "parameters": {
    "fields": {
      "values": [
        {
          "name": "rawMessage",
          "stringValue": "={{ $json.body }}"
        },
        {
          "name": "symbol",
          "stringValue": "={{ $json.body.match(/\\bSOL\\b/i) ? 'SOL-PERP' : ... }}"
        },
        {
          "name": "direction",
          "stringValue": "={{ $json.body.match(/\\b(sell|short)\\b/i) ? 'short' : 'long' }}"
        },
        {
          "name": "timeframe",
          "stringValue": "={{ $json.body.match(/\\.P\\s+(\\d+)/)?.[1] || '15' }}"
        }
      ]
    }
  },
  "name": "Parse Signal",
  "type": "n8n-nodes-base.set"
}

New Node (Parse Signal Enhanced):

• Extracts: symbol, direction, timeframe (same as before)
• NEW: Also extracts ATR, ADX, RSI, volumeRatio, pricePosition
• Place after the "Webhook" node
• Connect: Webhook → Parse Signal Enhanced → 15min Chart Only?

Step 3: Update Check Risk Node

Current jsonBody (line 103):

{
  "symbol": "{{ $json.symbol }}",
  "direction": "{{ $json.direction }}"
}

Updated jsonBody (add 5 context metrics):

{
  "symbol": "{{ $json.symbol }}",
  "direction": "{{ $json.direction }}",
  "atr": {{ $json.atr || 0 }},
  "adx": {{ $json.adx || 0 }},
  "rsi": {{ $json.rsi || 0 }},
  "volumeRatio": {{ $json.volumeRatio || 0 }},
  "pricePosition": {{ $json.pricePosition || 0 }}
}

Step 4: Update Execute Trade Node

Current jsonBody (line 157):

{
  "symbol": "{{ $('Parse Signal').item.json.symbol }}",
  "direction": "{{ $('Parse Signal').item.json.direction }}",
  "timeframe": "{{ $('Parse Signal').item.json.timeframe }}",
  "signalStrength": "strong"
}

Updated jsonBody (add 5 context metrics):

{
  "symbol": "{{ $('Parse Signal Enhanced').item.json.symbol }}",
  "direction": "{{ $('Parse Signal Enhanced').item.json.direction }}",
  "timeframe": "{{ $('Parse Signal Enhanced').item.json.timeframe }}",
  "signalStrength": "strong",
  "atr": {{ $('Parse Signal Enhanced').item.json.atr || 0 }},
  "adx": {{ $('Parse Signal Enhanced').item.json.adx || 0 }},
  "rsi": {{ $('Parse Signal Enhanced').item.json.rsi || 0 }},
  "volumeRatio": {{ $('Parse Signal Enhanced').item.json.volumeRatio || 0 }},
  "pricePosition": {{ $('Parse Signal Enhanced').item.json.pricePosition || 0 }}
}

Step 5: Update Telegram Notification (Optional)

You can add quality score to Telegram messages:

Current message template (line 200):

🟢 TRADE OPENED

📊 Symbol: ${symbol}
📈 Direction: ${direction}
...

Enhanced message template:

🟢 TRADE OPENED

📊 Symbol: ${symbol}
📈 Direction: ${direction}
🎯 Quality Score: ${$('Check Risk').item.json.qualityScore || 'N/A'}/100
...

🧪 Testing Instructions

Test 1: High-Quality Signal (Should Execute)

Send webhook:

curl -X POST http://localhost:5678/webhook/tradingview-bot-v4 \
  -H "Content-Type: application/json" \
  -d '{"body": "SOL buy .P 15 | ATR:1.85 | ADX:32.3 | RSI:58.5 | VOL:1.65 | POS:45.3"}'

Expected:

• Parse Signal Enhanced extracts all 5 metrics
• Check Risk calculates quality score ~80/100
• Check Risk returns passed: true
• Execute Trade runs and stores metrics in database
• Telegram notification sent

Test 2: Low-Quality Signal (Should Block)

Send webhook:

curl -X POST http://localhost:5678/webhook/tradingview-bot-v4 \
  -H "Content-Type: application/json" \
  -d '{"body": "SOL buy .P 15 | ATR:0.35 | ADX:12.8 | RSI:78.5 | VOL:0.45 | POS:92.1"}'

Expected:

• Parse Signal Enhanced extracts all 5 metrics
• Check Risk calculates quality score ~20/100
• Check Risk returns passed: false, reason: "Signal quality too low (20/100). Issues: ATR too low (chop/low volatility), Weak/no trend (ADX), RSI extreme vs direction, Volume too low, Chasing (long near range top)"
• Execute Trade does NOT run
• Telegram error notification sent

Test 3: Backward Compatibility (Should Execute)

Send old format without metrics:

curl -X POST http://localhost:5678/webhook/tradingview-bot-v4 \
  -H "Content-Type: application/json" \
  -d '{"body": "SOL buy .P 15"}'

Expected:

• Parse Signal Enhanced extracts symbol/direction/timeframe, metrics default to 0
• Check Risk skips quality scoring (ATR=0 means no metrics)
• Check Risk returns passed: true (only checks risk limits)
• Execute Trade runs with null metrics
• Backward compatible

📊 Scoring Logic

Scoring Breakdown (Base: 50 points)

1. ATR Check (-15 to +10 points)

   • ATR < 0.6%: -15 (choppy/low volatility)
   • ATR > 2.5%: -20 (extreme volatility)
   • 0.6-2.5%: +10 (healthy)

2. ADX Check (-15 to +15 points)

   • ADX > 25: +15 (strong trend)
   • ADX 18-25: +5 (moderate trend)
   • ADX < 18: -15 (weak/no trend)

3. RSI Check (-10 to +10 points)

   • Long + RSI > 50: +10 (momentum supports)
   • Long + RSI < 30: -10 (extreme oversold)
   • Short + RSI < 50: +10 (momentum supports)
   • Short + RSI > 70: -10 (extreme overbought)

4. Volume Check (-10 to +10 points)

   • Volume > 1.2x avg: +10 (strong participation)
   • Volume < 0.8x avg: -10 (low participation)
   • 0.8-1.2x avg: 0 (neutral)

5. Price Position Check (-15 to +5 points)

   • Long at range top (>80%): -15 (chasing)
   • Short at range bottom (<20%): -15 (chasing)
   • Otherwise: +5 (good position)

Minimum Passing Score: 60/100

Example Scores

Perfect Setup (Score: 90):

• ATR: 1.5% (+10)
• ADX: 32 (+15)
• RSI: 58 (long) (+10)
• Volume: 1.8x (+10)
• Price: 45% (+5)
• Total: 50 + 10 + 15 + 10 + 10 + 5 = 90

Terrible Setup (Score: 20):

• ATR: 0.3% (-15)
• ADX: 12 (-15)
• RSI: 78 (long) (-10)
• Volume: 0.5x (-10)
• Price: 92% (-15)
• Total: 50 - 15 - 15 - 10 - 10 - 15 = -5 → Clamped to 0

🔍 Monitoring

Check Logs

Watch check-risk decisions:

docker logs trading-bot-v4 --tail 100 -f | grep "Signal quality"

Example output:

✅ Signal quality: 75/100 - HIGH QUALITY
🎯 Quality reasons: Strong trend (ADX: 32.3), Healthy volatility (ATR: 1.85%), Good volume (1.65x avg), RSI supports direction (58.5), Good entry position (45.3%)

❌ Signal quality: 35/100 - TOO LOW (minimum: 60)
⚠️  Quality reasons: Weak/no trend (ADX: 12.8), ATR too low (chop/low volatility), RSI extreme vs direction, Volume too low, Chasing (long near range top)

Database Query

Check stored metrics:

SELECT 
  symbol, 
  direction, 
  entryPrice,
  atrAtEntry,
  adxAtEntry,
  rsiAtEntry,
  volumeAtEntry,
  pricePositionAtEntry,
  realizedPnL
FROM "Trade"
WHERE createdAt > NOW() - INTERVAL '7 days'
ORDER BY createdAt DESC;

🎛️ Tuning Parameters

All scoring thresholds are in app/api/trading/check-risk/route.ts (lines 210-320):

// ATR thresholds
if (atr < 0.6) points -= 15  // Too low
if (atr > 2.5) points -= 20  // Too high

// ADX thresholds
if (adx > 25) points += 15   // Strong trend
if (adx < 18) points -= 15   // Weak trend

// Minimum passing score
if (score < 60) {
  return { passed: false, ... }
}

Adjust these based on backtesting results. For example:

• If too many good trades blocked: Lower minimum score to 50
• If still overtrading: Increase ADX threshold to 30
• For different assets: Adjust ATR ranges (crypto vs stocks)

📈 Next Steps

1. Deploy to Production:

   • Update n8n workflow (Steps 1-5 above)
   • Test with both formats
   • Monitor logs for quality decisions

2. Collect Data:

   • Run for 2 weeks to gather quality scores
   • Analyze correlation: quality score vs P&L
   • Identify which metrics matter most

3. Optimize:

   • Query database: SELECT AVG(realizedPnL) FROM Trade WHERE adxAtEntry > 25
   • Fine-tune thresholds based on results
   • Consider dynamic scoring (different weights per symbol/timeframe)

4. Future Enhancements:

   • Add more metrics (spread, funding rate, correlation)
   • Machine learning: Train on historical trades
   • Per-asset scoring models
   • Signal source scoring (TradingView vs manual)

🚨 Troubleshooting

Problem: All signals blocked

• Check logs: docker logs trading-bot-v4 | grep "quality"
• Likely: TradingView not sending metrics (verify alert format)
• Workaround: Temporarily lower minimum score to 40

Problem: No metrics in database

• Check Parse Signal Enhanced extracted metrics: View n8n execution
• Verify Check Risk received metrics: curl localhost:3001/api/trading/check-risk with test data
• Check execute endpoint logs: Should show "Context metrics: ATR:..."

Problem: Metrics always 0

• TradingView alert not using enhanced indicator
• Parse Signal Enhanced regex not matching
• Test parsing: node -e "console.log('SOL buy .P 15 | ATR:1.85'.match(/ATR:([\d.]+)/))"

📝 Files Modified

• ✅ workflows/trading/moneyline_v5_final.pinescript - Enhanced indicator
• ✅ workflows/trading/parse_signal_enhanced.json - n8n parser
• ✅ app/api/trading/check-risk/route.ts - Quality scoring
• ✅ app/api/trading/execute/route.ts - Store metrics
• ✅ lib/database/trades.ts - Updated interface
• ✅ prisma/schema.prisma - Added 5 fields
• ✅ prisma/migrations/...add_rsi_and_price_position_metrics/ - Migration
• ⏳ workflows/trading/Money_Machine.json - Manual update needed

🎯 Success Criteria

Signal quality scoring is working correctly when:

1. ✅ TradingView sends alerts with metrics
2. ✅ n8n Parse Signal Enhanced extracts all 5 metrics
3. ✅ Check Risk calculates quality score 0-100
4. ✅ Low-quality signals (<60) are blocked with reasons
5. ✅ High-quality signals (>60) execute normally
6. ✅ Context metrics stored in database for every trade
7. ✅ Backward compatible with old alerts (metrics=0, scoring skipped)
8. ✅ Logs show quality score and reasons for every signal

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Status: Ready for production testing Last Updated: 2024-10-30 Author: Trading Bot v4 Signal Quality System