Volatility Breakout Strategy Diagram
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A channel built by hand: a simple moving average gives the centre, the Average True Range gives the width, and a close outside SMA plus or minus a multiple of ATR is treated as a move worth joining. Because the channel breathes with volatility, the same multiplier stays meaningful in quiet and in fast markets.
Strategy Overview
- SMA and ATR run over the same period on finished candles, so the channel is centred on the average price and scaled by the recent true range.
- Two formula blocks assemble the edges: the upper edge is SMA plus multiplier times ATR, the lower one is SMA minus the same amount.
- The strategy is always in the market: a breakout in the opposite direction reverses the position, and a protective stop closes it earlier if the move fails.
Entry and Exit Rules
- Long entry: The candle closes above SMA plus multiplier times ATR and the position is not long. The order buys the base volume plus the absolute position, so a short is reversed into a long and a flat account opens a long.
- Short entry: The candle closes below SMA minus multiplier times ATR and the position is not short. The order sells the base volume plus the absolute position, so a long is reversed into a short and a flat account opens a short.
- Exit: There is no indicator-based exit. The position is reversed by the opposite breakout, or closed earlier by the protective stop-loss block attached to the trades of both entries.
Parameters
| Parameter | Default | Description |
|---|---|---|
| Indicator period | 20 | Period shared by the SMA that centres the channel and by the ATR that sets its width. |
| ATR multiplier | 2 | How many ATRs away from the moving average the breakout edge sits. |
| Stop loss, % | 2 | Protective stop loss, in percent of the entry price. |
| Volume | 1 | Base order volume, in lots; the absolute position is added when reversing. |
| Candles | 00:05:00 | Candle time frame the whole diagram works on. |
Diagram Details
- The candle block feeds the two indicators and, through a converter, the close price used both for the comparisons and as the price source of the protection block.
- A constant holds the multiplier, and two formula blocks compute the upper and the lower edge from SMA, the multiplier and ATR.
- Two comparison blocks test the close against the edges, two more compare the position against zero, and each logical AND joins one of each into an entry.
- A formula block computes the reversal volume as base volume plus the absolute position and feeds both position modify blocks.
- The diagram uses a two-percent stop, a portable distance that remains meaningful across instruments.
Usage
Import the .json file into Designer, run it in the backtester on historical data, then adjust the parameters or the blocks themselves to fit your instrument before trading it live.