The Universal Forecast Funnel: Trading the Probability Cone (Not the Prediction)

In professional trading, the edge doesn't come from predicting the future—it comes from correctly identifying the current regime. Most retail traders use indicators like the RSI or MACD, which are mathematically designed to lag. They tell you what happened, not what is happening.

We built the Universal Forecast Funnel (UFF) on the TakeProfit platform to solve a specific problem: Visualizing Market Inertia.

This tool uses Ordinary Least Squares (OLS) regression to project a "Cone of Uncertainty" into the future. It’s not a crystal ball. It is a statistical map that tells you—in less than 10 seconds—whether you should be following the trend or fading the move.

The "10-Second" Utility: How This Helps You Right Now

You don't need a PhD in statistics to use this. Here is the immediate practical value of the UFF when you load it on a chart:

1. Instant Regime Identification:

• Is the Funnel pointing up/down? You are in a Trend. Look for pullbacks to the central line.
• Is the Funnel flat? You are in a Range. Buy the bottom edge, sell the top edge.

2. The "Rubber Band" Effect:

• The outer bands represent 2.0 to 2.5 Standard Deviations (SD). Statistically, price spends 95% of its time inside these bands.
• Actionable Signal: If price hits the edge of the funnel, it is mathematically "stretched." The probability of a snap-back (Mean Reversion) is now at its highest.

3. The Truth Filter (R-squared, R²):

• The indicator color-codes the projection. If it’s Grey (Low R²), the market is noisy. Do not trade trend setups.
• If it’s Colored (High R²), the trend is mathematically significant.

Under the Hood: The Quantitative Engine

Why use OLS Regression instead of a Moving Average?

• Speed vs. Lag: An SMA is like a cruise ship; it takes a long time to turn. Linear Regression is like a speedboat. It recalculates the slope of the best-fit line instantly. It reacts to a trend change 3-5 bars faster than an SMA.
• The Cone of Uncertainty: We project this line into the future (time  t +n ). But we know price wobbles. By adding Standard Deviation (SD) bands that widen as they go further out, we visualize the risk.
• Narrow Cone: The market is orderly.
• Wide Cone: Volatility is expanding; expect turbulence.

Why Indie?

Standard TradingView (Pine Script) tools often struggle with complex "future" array calculations without repainting the past or slowing down the chart. We used Indie to perform robust array looping, allowing us to draw a precise, filled probability cone that updates in real-time without lagging your browser.

The Critical Weaknesses (What Others Won't Tell You)

Most indicators sell you a dream. To use the UFF effectively, you must understand where it breaks.

1. The "Black Swan" Failure

Linear Regression assumes the current trajectory will continue. It cannot see news.

• The Risk: If CPI data drops and the market crashes, the UFF will still be pointing "Up" for several bars until the math catches up.
• The Fix: Never use this tool during high-impact news releases.

2. The Repainting Nuance

This is vital: The Historical line does not repaint. The Future Cone does.

• The Risk: A candle might poke out of the funnel at 10:05 AM (signaling a breakout), but by 10:15 AM, the price drops, the volatility calculation adjusts, and the cone widens to swallow the price.
• The Fix: Never execute on the open candle. Always wait for the bar to close to confirm the signal is locked.

3. Low Sample Size

Regression requires data density. On extremely low timeframes (like the 1-minute chart) or illiquid coins, price action is random noise. Fitting a regression line to noise results in "Curve Fitting." The R²  filter helps, but it’s best used on 15m+ timeframes.

Two Strategies to Test Today

Strategy A: The "Crypto Momentum" (Trend Following)

• Asset: Bitcoin/Ethereum/Solana (High Volatility).
• Setting: UFF Preset "Crypto" (2.5 SD).
• Logic: Cryptos have "Fat Tails"—they trend harder than fiat currencies.
• The Trade: Wait for the Funnel to tilt sharply Up/Down with High Confidence (R² > 0.5). Enter on a pullback to the Central Basis Line. Ride the trend until the slope flattens.

Strategy B: The "Forex Snap-Back" (Mean Reversion)

• Asset: EURUSD/GBPUSD (Mean Reverting).
• Setting: UFF Preset "Forex" (2.0 SD).
• Logic: Currencies hate deviating from value.
• The Trade: When the Funnel is Flat (Sideways), wait for price to touch the Upper/Lower Band. Enter counter-trend targeting the Central Line.

Conclusion

The Universal Forecast Funnel is not a magic wand that tells you the future. It is a speedometer and a map. It tells you how fast the market is going and how bumpy the road is likely to be.

By visualizing the "Cone of Uncertainty," you stop chasing price and start trading probabilities.

(Click here to copy the Indie code and add it to your workspace)

Indicator Description: here