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.
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.
- 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