2014issue C1214-20
Constructing an intraday flag breakout as one procedure
On 15-minute charts the archive treated flags as short consolidations after a steep impulse, then converted that structure into a breakout-system: a percentile detection screen, a measured-move sized from the pole, and five exits run as one procedure.
- On 15-minute charts the archive treated flags as short consolidations after a steep impulse, with average duration of 8 bars and median duration of 6 bars.
- The detection screen required a pole of at least 5.5 ATR in 23 bars or fewer, a flag that broke out in 15 bars or fewer, and flag depth no greater than 2.5 ATR.
- The profit target was k times pole height in percent terms, with k equal to 1.2 in the volatile Nasdaq stock sample and a different constant on stock-index futures as volatility changed.
- Five exits were implemented as one procedure: a 1.2-times-pole target, a stop under the flag, a chandelier-style trailing stop, an inactivity exit, and a time exit.
From a continuation pause to a full rule set
A flag-and-pennant is a brief continuation pause after a steep move, bounded by parallel lines (flag) or converging lines (pennant), then resolved by a breakout in the prior direction.
A breakout-system is a complete rule set that turns a chart condition into entry, exit, and abstention decisions that can be tested as one procedure. This archive note follows one historical path from that chart object to the full rule set.
Sample durations on 15-minute charts
On 15-minute charts the archive treated flags as short consolidations after a steep impulse. Average flag duration was 8 bars and median duration was 6 bars.
In the same 15-minute sample, average pole duration was 14 bars and average breakout duration was 49 bars. The 90th percentile of breakout duration was 97 bars.
A detection screen with measurable bounds
The archive defined a detection screen from those sample tails. It used the 90th percentile for pole and flag duration and the 10th percentile for minimum pole height.
The resulting bounds were a pole of at least 5.5 ATR in 23 bars or fewer, a flag that broke out in 15 bars or fewer, and flag depth no greater than 2.5 ATR.
A measured-move sized from the pole
A measured-move is a target derived from the pole: the expected follow-through is a multiple of the prior impulse rather than an arbitrary price level.
The archive sized the profit target as k times pole height in percent terms and used k = 1.2 for the volatile Nasdaq stock sample.
On five stock-index futures the same target constant k varied with underlying volatility, from 0.7 for mini Dow and emini S&P 500 to 1.1 for emini Russell 2000 and emini Nasdaq 100.
Five exits as one procedure
The archive implemented five exits as one procedure: a 1.2-times-pole target, a stop under the flag, a chandelier-style trailing stop, an inactivity exit, and a time exit.
Editorial reading: treat every exit as a hypothesis about what would invalidate the setup. The pole-based target, the stop under the flag, the chandelier-style trail, the inactivity exit, and the time exit are not five separate opinions. They are one procedure with five ways to be wrong.
All readings on this track · 12 readings
- 1990Constructing volume-budget targets after a breakout
- 1991Constructing price objectives from measured moves and swings
- 1997Measuring chart pattern height for breakout targets
- 1998Double-top confirmation before the measured move
- 1998Writing entry, target, and trail as one procedure
- 2005Constructing flag and pennant measured moves
- 2006The swing rule as a measured move beyond a broken barrier
- 2011Prove the X7 turn before measuring the reversal
- 2014Constructing an intraday flag breakout as one procedure
- 2017Price mirrors as a fold-test for reversal targets
- 2017First swing box as a measured-move exit ruler
- 2020The recovered swing high as a halfway-reaction checkpoint