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1995issue C041-5

Range breakout rules with an expansion filter and moving-average exits

The evaluation identifies a range first and trades a later breakout. Unused ticks, a five-session minimum, frozen bounds, a close-plus-expansion entry, and separate moving-average exits turn those rules into one procedure.

  • The evaluation treats a market as either trending or occupying a range while waiting for the next trend, so the range is identified first and the breakout is traded later.
  • A tight-narrow range qualifies only when unused ticks stay below 200 percent of the band height, and a lengthy range needs five consecutive sessions before the high and low are frozen.
  • A breakout-close entry is a same-session close outside those frozen-range bounds that also meets the range-expansion filter of more than 125 percent of the prior eight-session average daily range.
  • A long is held until a close below the eight-session moving average of daily lows, and a short until a close above the ten-session moving average of daily highs.
Entries in this reading3 entries
Current trackBreakout system74 readingsRule-based entry193 readingsMoving average465 readings

Identify the range, then trade the later breakout

The evaluation starts from a two-state market premise. A market is either trending or occupying a range while waiting for the next trend, so a range is identified first and a breakout is traded later.

Tight, lengthy, and then frozen

A tight and narrow range is a consecutive-day window in which unused price ticks are less than 200 percent of the window height from highest high to lowest low. In the illustrated five-day window, 22 unused ticks and a 40-tick height meet the tightness test because 22 is less than 80, which is 200 percent of 40.

A lengthy range is five consecutive sessions. After that minimum, the range high and low stay fixed until a later breakout. Those unchanged highs and lows are the frozen-range bounds.

A close outside the band is not enough

A sharp psychology shift is a session range larger than 125 percent of the average daily range over the prior eight sessions. If that eight-session average is 20 ticks, the threshold is more than 25 ticks. That confirmation is the range-expansion filter.

A rule-based entry is signaled only on a close outside the frozen range that also satisfies the 125 percent eight-session expansion filter. The breakout-close entry is that same-session close above the frozen high or below the frozen low.

Long and short exits use different averages

A long is held until a close below the eight-session moving average of daily lows, which is the long-exit average. A short is held until a close above the ten-session moving average of daily highs, which is the short-exit average.

What the historical evaluation ran

The historical evaluation traded one Treasury bond futures contract from 1984 through 1994 and applied no slippage or commission charge.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
1 of 23 in the Breakout system track
19951-3 pp.Next on Breakout systemWrite a weekly breakout as one parameterized entry and exitA long entry pairs a five-bar high break with a higher-low filter that requires the five-bar low to sit above the thirteen-bar low.
All readings on this track · 23 readings
  1. 1995Range breakout rules with an expansion filter and moving-average exits
  2. 1995Write a weekly breakout as one parameterized entry and exit
  3. 1995Combining a trend rule, a breakout trigger, and a seasonal filter
  4. 1996Constructing a two-bar clearance breakout from a twenty-session exponential average
  5. 1996Two-bar exponential-average breakout as setup, stop, and flatten
  6. 1998A noise-offset breakout judged after walk-forward re-estimation
  7. 1998Gating a weekly average crossover with stored support and resistance
  8. 1998Moving-average candidates gated by support and resistance
  9. 2000Constructing next-close envelope targets for breakout stops
  10. 2001February soybean high breakout and June trailing stop
  11. 2005Box-and-breakout states written as ordered entry and exit rules
  12. 2007Match trend and breakout rules to the market condition
  13. 2010How a JM internal band becomes long and short entry and exit rules
  14. 2013Constructing a three-average trend-aligned breakout system
  15. 2016Volume-confirmed breakout entry rules
  16. 2017How to construct exponential standard deviation bands
  17. 2017Four-day green candle breakout as one swing procedure
  18. 2018Constructing inverse ETF breakouts above a 200-day average
  19. 2018Evaluating trend, breakout, and regression rules by average robustness
  20. 2019A crypto pair breakout after a sideways range
  21. 2019Next-session breakout rules after a high-volume close
  22. 2020Altcoin dual-stop breakout with a timed exit
  23. 2020Critiquing required stops in mechanical breakout systems
By fieldEntry and exit rules231 readingsBy year199581 readings
All 74 readings tagged Breakout system
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