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Volatility Breakout Strategy

The Volatility Breakout strategy seeks strong directional moves when price escapes from its average range. By measuring the distance from a simple moving average using the Average True Range, the algorithm defines breakout thresholds that scale with volatility.

Testing indicates an average annual return of about 97%. It performs best in the crypto market.

A buy order is triggered when the close rises above the SMA by more than Multiplier times the ATR. A sell signal appears when the close falls below the SMA by the same distance. Positions remain open until an opposite breakout occurs or a protective stop is hit.

This technique caters to intraday traders who thrive on momentum surges. Using ATR-based thresholds helps filter out noise so only significant moves generate trades.

Details

  • Entry Criteria:
    • Long: Close > SMA + Multiplier * ATR
    • Short: Close < SMA - Multiplier * ATR
  • Long/Short: Both sides.
  • Exit Criteria:
    • Long: Exit when an opposite breakout triggers or stop-loss hits
    • Short: Exit when an opposite breakout triggers or stop-loss hits
  • Stops: Yes, stop-loss at Multiplier * ATR from entry.
  • Default Values:
    • Period = 20
    • Multiplier = 2.0m
    • CandleType = TimeSpan.FromMinutes(5)
  • Filters:
    • Category: Breakout
    • Direction: Both
    • Indicators: SMA, ATR
    • 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>
/// Volatility Breakout strategy. Enters trades when price breaks out from average price with volatility threshold.
/// </summary>
public class VolatilityBreakoutStrategy : Strategy
{
	private readonly StrategyParam<int> _periodParam;
	private readonly StrategyParam<decimal> _multiplierParam;
	private readonly StrategyParam<DataType> _candleTypeParam;

	private SimpleMovingAverage _sma;
	private AverageTrueRange _atr;
	
	private decimal _prevSma;
	private decimal _prevAtr;

	/// <summary>
	/// Period for SMA and ATR calculations.
	/// </summary>
	public int Period
	{
		get => _periodParam.Value;
		set => _periodParam.Value = value;
	}

	/// <summary>
	/// Volatility multiplier for breakout threshold.
	/// </summary>
	public decimal Multiplier
	{
		get => _multiplierParam.Value;
		set => _multiplierParam.Value = value;
	}

	/// <summary>
	/// Candle type for strategy.
	/// </summary>
	public DataType CandleType
	{
		get => _candleTypeParam.Value;
		set => _candleTypeParam.Value = value;
	}

	/// <summary>
	/// Constructor.
	/// </summary>
	public VolatilityBreakoutStrategy()
	{
		_periodParam = Param(nameof(Period), 20)
			.SetGreaterThanZero()
			.SetDisplay("Period", "Period for SMA and ATR", "Parameters")
			
			.SetOptimize(10, 50, 5);

		_multiplierParam = Param(nameof(Multiplier), 2.0m)
			.SetRange(0.1m, decimal.MaxValue)
			.SetDisplay("Multiplier", "Volatility multiplier for breakout threshold", "Parameters")
			
			.SetOptimize(1.0m, 3.0m, 0.5m);

		_candleTypeParam = Param(nameof(CandleType), TimeSpan.FromMinutes(5).TimeFrame())
			.SetDisplay("Candle Type", "Candle type for strategy", "Common");
	}

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

	/// <inheritdoc />
	protected override void OnReseted()
	{
		base.OnReseted();

		_sma = null;
		_atr = null;
		_prevSma = 0;
		_prevAtr = 0;
	}

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

// Create indicators
		_sma = new SMA { Length = Period };
		_atr = new AverageTrueRange { Length = Period };

		// Create subscription and bind indicators
		var subscription = SubscribeCandles(CandleType);
		subscription
			.Bind(_sma, _atr, ProcessCandle)
			.Start();

		// Setup chart visualization if available
		var area = CreateChartArea();
		if (area != null)
		{
			DrawCandles(area, subscription);
			DrawIndicator(area, _sma);
			DrawOwnTrades(area);
		}
		
		// Enable position protection
		StartProtection(
			takeProfit: new Unit(0, UnitTypes.Absolute), // No take profit
			stopLoss: new Unit(Multiplier, UnitTypes.Absolute) // Stop loss at 2*ATR
		);
	}

	private void ProcessCandle(ICandleMessage candle, decimal smaValue, decimal atrValue)
	{
		if (candle.State != CandleStates.Finished)
			return;

		if (!IsFormedAndOnlineAndAllowTrading())
			return;
		
		// Save values for the next candle
		var currentSma = smaValue;
		var currentAtr = atrValue;
		
		// Skip first candle after indicators become formed
		if (_prevSma == 0 || _prevAtr == 0)
		{
			_prevSma = currentSma;
			_prevAtr = currentAtr;
			return;
		}
		
		// Calculate volatility threshold
		var threshold = Multiplier * currentAtr;
		
		// Check for long setup - price breaks above SMA + threshold
		if (candle.ClosePrice > currentSma + threshold && Position <= 0)
		{
			// Close any short position and open long
			BuyMarket(Volume + Math.Abs(Position));
		}
		// Check for short setup - price breaks below SMA - threshold
		else if (candle.ClosePrice < currentSma - threshold && Position >= 0)
		{
			// Close any long position and open short
			SellMarket(Volume + Math.Abs(Position));
		}
		
		// Update previous values for next candle
		_prevSma = currentSma;
		_prevAtr = currentAtr;
	}
}