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