Support-Resistance breakout

The Support-Resistance breakout indicator provides a systematic approach to trend identification and trade execution by identifying fractal-based highs and lows to detect market breakouts. It aims to capture momentum by going long on resistance breakouts and short on support breakouts, utilizing a dynamic range calculation to refine entry and exit signals.

Usage

The tool is primarily used as a breakout strategy. It identifies significant price pivots and establishes horizontal support and resistance levels. A long position is triggered when the price breaks above the resistance level, provided the prevailing trend is bullish. Conversely, a short position is initiated when price breaks below the support level during a bearish trend.

The strategy also employs an exit logic based on trend reversals. If the price action shifts against the open position and crosses the dynamic threshold defined by the moving average of high/low differences, the strategy closes the trade to preserve capital.

Details

The script identifies market highs and lows using fractal geometry, specifically looking for a five-bar pattern where the middle bar is the extreme. This method introduces a small lag (typically 2 bars for confirmation) but ensures the levels are structurally sound.

A unique feature of this tool is the "Alternative SR Level" calculation. Inspired by dynamic range concepts, it calculates the difference between the Simple Moving Average (SMA) of identified highs and the SMA of identified lows over a specified lookback period. This difference creates a secondary boundary (lValR and hValR) used to define the overall trend direction and set exit conditions, helping to filter out minor price fluctuations that do not constitute a true trend change.

Settings

• SR lookback length: Determines the period used to sum the fractal occurrences and calculate the average difference between highs and lows. A higher value results in more stable, long-term levels, while a lower value makes the indicator more sensitive to recent price action.

FAQ

How do I interpret the bar colors?

The bars change color based on the strategy state: green typically indicates an active long condition, red indicates an active short condition, and neutral colors represent the underlying trend bias without an active breakout signal.

What is the significance of the fractal lag?

Because the script requires confirmation that a high or low is indeed a pivot, it waits for subsequent bars to close lower (for a high) or higher (for a low). This ensures the levels plotted are statistically significant pivots rather than temporary spikes.

How can I access Support-Resistance breakout?

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