Breakout Trend Follower Strategy

The Breakout Trend Follower Strategy indicator is a technical tool designed to capture momentum by entering long positions when price breaks above recent swing highs and utilizing swing lows as dynamic trailing stops. This script aims to capitalize on significant trend expansions that typically follow periods of consolidation or equilibrium patterns.

Usage

The strategy is primarily used to identify and trade trend breakouts. It places stop-buy orders at historical pivot highs to ensure entry occurs only when price strength is confirmed. Users can utilize this on various timeframes, such as the 30-minute chart for equities or the 2-hour chart for higher-volatility assets like cryptocurrencies.

The tool includes several filters to refine entries:

• Trend Filtering: Use single or multi-timeframe moving averages to ensure trades are only taken in the direction of the broader trend.
• Consolidation Filtering: Employ RSI or ADR-based filters to avoid entering "extended" moves, focusing instead on breakouts from tight ranges.
• Exit Management: The strategy automatically adjusts its exit point to the most recent swing low, acting as a trailing stop to protect profits during a sustained trend.

Details

The script identifies local peaks and troughs using a "Pivot Lookback" period. These pivots serve as the basis for the breakout entry levels (resistance) and the stop-loss levels (support). The implementation includes a visual representation of these levels using dynamic lines that extend across the chart.

Additionally, the strategy calculates the Average Daily Range (ADR) and compares it to the current price range to determine if a setup is too volatile or "stretched" for a high-probability entry.

Settings

Support & Resistance Levels

• Pivot Lookback: The number of bars to the left and right used to determine a local pivot point.
• Show Historical Pivot Points: Toggles the visibility of historical pivot levels on the chart.
• Current Range S/R Colors: Customizes the colors for the current support and resistance lines.

Moving Average Filters

• Use Current Timeframe Moving Average for Filtering: Enables a trend filter based on the chart's current timeframe.
• MA Type/Period: Choose between SMA or EMA and set the length for the trend filter.
• Use Multi-Timeframe Moving Average for Filtering: Enables a secondary trend filter from a different timeframe (e.g., Daily).

RSI Filtering

• Use RSI for Filtering: When enabled, ignores signals if the RSI is above a specific overbought level.
• RSI Timeframe/Overbought Level: Configures the period and threshold for the RSI filter.

ADR Filtering

• Use ADR for Filtering: Filters signals based on whether the current range is within a percentage of the Average Daily Range.
• % of ADR Value: The threshold used to define if a price move is too extended.
• ADR Table Visibility: Controls the placement of the on-screen information table.

FAQ

How do I use the moving average filter effectively?

To ensure you are only buying in an uptrend, enable the "Use Current Timeframe Moving Average" setting. This prevents the strategy from taking breakout signals when the price is trading below the specified MA, helping you avoid counter-trend "fakeouts" in bearish environments.

What is the purpose of the ADR table?

The ADR table provides a real-time comparison between the asset's typical daily volatility (ADR) and the current support/resistance range. If the range is significantly higher than the ADR, it may indicate the move is overextended and higher risk.

How can I access this indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.