A tight-range volatility breakout as one classroom procedure

One procedure for entry, exit and stand-aside

The archive workflow builds a range-breakout from three separable parts. First it names a tight-narrow range from a short lookback. Then it allows an entry only after a range-expansion through a stored extreme. Then it hands the exit to a moving-average rule that does not reuse the contraction test.

Name the contraction first

A five-bar window high and window low are the first inputs used to define a tight-narrow range. Unused-ticks equal the sum of each bar's gap from the window high plus each bar's gap from the window low. The same quantity is five times the window span plus the sum of each bar's low minus high.

A tight-narrow range is a short lookback window whose unused interior ticks are large relative to the window high-low span.

Accept the reading with one of two tests

One encoding accepts a tight-narrow range when twice the five-bar span exceeds that unused-tick sum. Another encoding accepts it when unused ticks as a percentage of the span fall below 200.

Store the extremes and require expansion

Long and short entry prices are the high and low of the most recently accepted tight-narrow window. Those prices are recovered from that earlier episode rather than always taken from the current five-bar extremes. The stored-range-high is the window high from the most recent accepted tight-narrow episode and is the long trigger. The stored-range-low is the matching window low and is the short trigger.

An entry is allowed only when the close breaks the stored range extreme and the current bar span is larger than 1.25 times an eight-bar average span. That second condition is the range-expansion: a current bar whose high-low span exceeds a stated multiple of a recent average span.

One encoding further requires that a tight-narrow reading occurred on at least one of the prior three bars before an expansion break can open a position.

Keep the exit on a moving average

Several encodings exit a long on a close below an eight-bar average of lows. That close through the average of lows is the average-low-exit. They exit a short on a close above a ten-bar average of highs. That close through the average of highs is the average-high-exit. One encoding uses eight-bar averages of both highs and lows.

Swap the lookback and retire a used contraction

The constriction lookback is written as a replaceable parameter, with four-bar and eight-bar windows named as alternatives to the five-bar default. After a position is open, one encoding resets the stored range high and low so a later entry cannot reuse the same contraction.