Breakout Strategy Based on Swing Highs and Lows

This article explains in detail a quantitative breakout trading strategy based on price swing highs and lows. It generates trading signals by identifying breaks of key price levels. I. Strategy Logic The main trading…

Author

ChaoZhang

Complexity

Starter · 39 lines

Parameters

Backtest bar

4h · intraday

Tested on

BTC/USDT · futures

This article explains in detail a quantitative breakout trading strategy based on price swing highs and lows. It generates trading signals by identifying breaks of key price levels.

I. Strategy Logic

The main trading logic is:

Calculate the highest high and lowest low of recent 3 bars for current short-term swing.
Calculate highest high and lowest low of recent 50 bars for the near-term range.
A buy signal is generated when price breaks below the short-term low and lower than the near-term low.
A sell signal is generated when price breaks above the short-term high and higher than the near-term high.
Stop loss and take profit are set to control risks.

By identifying breaks of key levels, this can effectively detect new emerging trends.

II. Advantages of the Strategy

The main advantages are:

Firstly, the breakout rules are simple and easy to implement.

Secondly, stop loss and take profit settings directly control trade risks.

Lastly, backtest time ranges can be set for testing different periods.

III. Potential Weaknesses

However, some potential issues exist:

Firstly, breakouts alone may generate false signals, failing to determine trends accurately.

Secondly, the lack of parameter tuning leads to limited stability.

Lastly, stop loss and take profit levels require optimization for risk-reward.

IV. Summary

In summary, this article has explained a quantitative breakout trading strategy based on price swing highs and lows. It aims to discover opportunities through key level breaks. While the concept is simple and clear, improvements in parameter tuning are required. Overall it provides a unique breakout approach.

Name	Default	What it controls
v_input_1	10	Stop Loss $
v_input_2	100	Profit Target $
v_input_3	true	Month
v_input_4	2021	Year

Name

Default

What it controls

v_input_1

Stop Loss $

v_input_2

100

Profit Target $

v_input_3

true

Month

v_input_4

2021

Year

/*backtest start: 2023-08-15 00:00:00 end: 2023-09-14 00:00:00 period: 4h basePeriod: 15m exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}] */ //@version=4 strategy("JetzGiantz Strategy", overlay=true) // Getting inputs StopTgt = input(10, minval=1, title="Stop Loss $") ProfTgt = input(100, minval=1, title="Profit Target $") //Filter backtest month and year startMonth = input(1, minval=1, maxval=12, title="Month") startYear = input(2021, minval=2000, maxval=2100, title="Year") //Filter funtion inputs //Calculations Low3 = lowest(low,3) Low50 = lowest(low,50) High3 = highest(high,3) High50 = highest(high,50) if (month>=startMonth and year>=startYear) if(close[1] < open[1] and close > open and close > open[1] and (Low3 < Low50[1] or Low3 < Low50[2] or Low3 < Low50[3])) strategy.order("BuyEntry", strategy.long, when=strategy.position_size == 0, comment="BuyEntry") if (month>=startMonth and year>=startYear) if(close[1] > open[1] and close < open and close > open[1] and (High3 > High50[1] or High3 > High50[2] or High3 > High50[3])) strategy.order("SellEntry", strategy.short, when=strategy.position_size == 0, comment="SellEntry") strategy.exit("bracket", loss=StopTgt, profit=ProfTgt, when=strategy.position_size > 0) strategy.exit("bracket", loss=StopTgt, profit=ProfTgt, when=strategy.position_size < 0)

Breakout Strategy Based on Swing Highs and Lows

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