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Momentum Breakout Strategy

This breakout system looks for sudden surges in momentum relative to its historical average. When momentum readings exceed the average by a large margin, price may be starting a fast directional move.

Testing indicates an average annual return of about 82%. It performs best in the stocks market.

The strategy buys when momentum rises above the average plus Multiplier times its standard deviation. A short is initiated when momentum falls below the average minus the same multiplier. Positions are closed once momentum returns toward its mean.

Traders who enjoy fast moves may appreciate the clear rules for capturing bursts of strength. A stop-loss based on percentage of price protects against failed breakouts.

Details

  • Entry Criteria:
    • Long: Momentum > Avg + Multiplier * StdDev
    • Short: Momentum < Avg - Multiplier * StdDev
  • Long/Short: Both sides.
  • Exit Criteria:
    • Long: Exit when Momentum < Avg
    • Short: Exit when Momentum > Avg
  • Stops: Yes, percent stop-loss.
  • Default Values:
    • MomentumPeriod = 14
    • AveragePeriod = 20
    • Multiplier = 2.0m
    • CandleType = TimeSpan.FromMinutes(5)
  • Filters:
    • Category: Breakout
    • Direction: Both
    • Indicators: Momentum
    • Stops: Yes
    • Complexity: Intermediate
    • Timeframe: Intraday
    • Seasonality: No
    • Neural networks: No
    • Divergence: No
    • Risk Level: Medium
using System;
using System.Linq;
using System.Collections.Generic;

using Ecng.Common;
using Ecng.Collections;
using Ecng.Serialization;

using StockSharp.Algo.Indicators;
using StockSharp.Algo.Strategies;
using StockSharp.BusinessEntities;
using StockSharp.Messages;

namespace StockSharp.Samples.Strategies;

/// <summary>
/// Momentum Breakout Strategy (245).
/// Enter when momentum breaks out above/below its average by a certain multiple of standard deviation.
/// Exit when momentum returns to its average.
/// </summary>
public class MomentumBreakoutStrategy : Strategy
{
	private readonly StrategyParam<int> _momentumPeriod;
	private readonly StrategyParam<int> _averagePeriod;
	private readonly StrategyParam<decimal> _multiplier;
	private readonly StrategyParam<DataType> _candleType;

	private Momentum _momentum;
	private SimpleMovingAverage _momentumAverage;
	private StandardDeviation _momentumStdDev;
	
	private decimal? _currentMomentum;
	private decimal? _momentumAvgValue;
	private decimal? _momentumStdDevValue;

	/// <summary>
	/// Momentum period.
	/// </summary>
	public int MomentumPeriod
	{
		get => _momentumPeriod.Value;
		set => _momentumPeriod.Value = value;
	}

	/// <summary>
	/// Period for momentum average calculation.
	/// </summary>
	public int AveragePeriod
	{
		get => _averagePeriod.Value;
		set => _averagePeriod.Value = value;
	}

	/// <summary>
	/// Standard deviation multiplier for entry.
	/// </summary>
	public decimal Multiplier
	{
		get => _multiplier.Value;
		set => _multiplier.Value = value;
	}

	/// <summary>
	/// Type of candles to use.
	/// </summary>
	public DataType CandleType
	{
		get => _candleType.Value;
		set => _candleType.Value = value;
	}

	/// <summary>
	/// Initializes a new instance of the <see cref="MomentumBreakoutStrategy"/>.
	/// </summary>
	public MomentumBreakoutStrategy()
	{
		_momentumPeriod = Param(nameof(MomentumPeriod), 14)
			.SetGreaterThanZero()
			.SetDisplay("Momentum Period", "Period for momentum calculation", "Strategy Parameters")
			
			.SetOptimize(10, 20, 2);

		_averagePeriod = Param(nameof(AveragePeriod), 20)
			.SetGreaterThanZero()
			.SetDisplay("Average Period", "Period for momentum average calculation", "Strategy Parameters")
			
			.SetOptimize(10, 30, 5);

		_multiplier = Param(nameof(Multiplier), 2.0m)
			.SetGreaterThanZero()
			.SetDisplay("StdDev Multiplier", "Standard deviation multiplier for entry", "Strategy Parameters")
			
			.SetOptimize(1.0m, 3.0m, 0.5m);

		_candleType = Param(nameof(CandleType), TimeSpan.FromMinutes(5).TimeFrame())
			.SetDisplay("Candle Type", "Type of candles to use", "Strategy Parameters");
	}

	/// <inheritdoc />
	public override IEnumerable<(Security sec, DataType dt)> GetWorkingSecurities()
	{
		return [(Security, CandleType)];
	}
	/// <inheritdoc />
	protected override void OnReseted()
	{
		base.OnReseted();

		_currentMomentum = default;
		_momentumAvgValue = default;
		_momentumStdDevValue = default;
	}


	/// <inheritdoc />
	protected override void OnStarted2(DateTime time)
	{
		base.OnStarted2(time);

		// Create indicators
		_momentum = new Momentum { Length = MomentumPeriod };
		_momentumAverage = new SMA { Length = AveragePeriod };
		_momentumStdDev = new StandardDeviation { Length = AveragePeriod };

		// Create candle subscription
		var subscription = SubscribeCandles(CandleType);

		// Create processing chain
		subscription
			.Bind(_momentum, ProcessMomentum)
			.Start();

		// Setup chart visualization if available
		var area = CreateChartArea();
		if (area != null)
		{
			DrawCandles(area, subscription);
			DrawIndicator(area, _momentum);
			DrawOwnTrades(area);
		}

		// Enable position protection
		StartProtection(
			takeProfit: new Unit(5, UnitTypes.Percent),
			stopLoss: new Unit(2, UnitTypes.Percent)
		);
	}

	private void ProcessMomentum(ICandleMessage candle, decimal momentumValue)
	{
		if (candle.State != CandleStates.Finished)
			return;

		// Store the current momentum value
		_currentMomentum = momentumValue;

		// Process momentum through average and standard deviation indicators
		var avgIndicatorValue = _momentumAverage.Process(new DecimalIndicatorValue(_momentumAverage, momentumValue, candle.ServerTime) { IsFinal = true });
		var stdDevIndicatorValue = _momentumStdDev.Process(new DecimalIndicatorValue(_momentumStdDev, momentumValue, candle.ServerTime) { IsFinal = true });
		
		_momentumAvgValue = avgIndicatorValue.ToDecimal();
		_momentumStdDevValue = stdDevIndicatorValue.ToDecimal();
		
		if (!_momentumAverage.IsFormed || !_momentumStdDev.IsFormed)
			return;

		// Ensure we have all needed values
		if (!_currentMomentum.HasValue || !_momentumAvgValue.HasValue || !_momentumStdDevValue.HasValue)
			return;

		// Calculate bands
		var upperBand = _momentumAvgValue.Value + Multiplier * _momentumStdDevValue.Value;
		var lowerBand = _momentumAvgValue.Value - Multiplier * _momentumStdDevValue.Value;

		LogInfo($"Momentum: {_currentMomentum}, Avg: {_momentumAvgValue}, Upper: {upperBand}, Lower: {lowerBand}");

		// Entry logic - BREAKOUT (not mean reversion)
		if (Position == 0)
		{
			// Long Entry: Momentum breaks above upper band (strong upward momentum)
			if (_currentMomentum.Value > upperBand)
			{
				BuyMarket();
			}
			// Short Entry: Momentum breaks below lower band (strong downward momentum)
			else if (_currentMomentum.Value < lowerBand)
			{
				SellMarket();
			}
		}
	}
}