Low volatility Buy w/ TP & SL

The Low volatility Buy w/ TP & SL indicator is a trend-following tool designed to identify potential breakout opportunities by monitoring the convergence and positioning of three simple moving averages.

Usage

The tool is primarily used to identify "accumulation" areas where volatility has compressed, signaling a potential trend expansion. A buy signal is generated when the Slow MA (200) and the Fast MA (50) are both positioned above the Normal MA (100). This specific alignment suggests a consolidation phase that often precedes a bullish breakout.

The strategy is optimized for the 1-hour timeframe and includes built-in risk management via percentage-based Take Profit and Stop Loss levels. For example, if the price increases by the set Take Profit percentage (defaulting to 6% in the script, though often used at 8%), the position closes. Conversely, if the price drops by the Stop Loss percentage (defaulting to 3%, often used at 4%), the trade is exited to protect capital.

Details

This script operates on the principle that periods of low volatility (compression) are followed by periods of high volatility (expansion). By using three different moving average lengths, the script identifies moments where the medium-term trend (100 MA) is being "squeezed" or outperformed by the short-term (50 MA) and long-term (200 MA) averages. This specific technical setup aims to enter trades before a strong directional move occurs. The use of a 2:1 Reward-to-Risk ratio is a core component of this strategy's long-term viability.

Settings

Date Range

• From Month/Day/Year: Sets the start date for the backtesting window.
• Thru Month/Day/Year: Sets the end date for the backtesting window.
• Show Date Range: Toggles the visibility of the backtest period.

MA Settings

• Fast MA Length: The period for the shortest moving average (default is 50).
• Normal MA Length: The period for the middle moving average used as the baseline for the entry condition (default is 100).
• Slow MA Length: The period for the longest moving average (default is 200).

Risk Management

• Stop Loss (%): The percentage decline from entry price required to trigger a stop-loss exit.
• Take Profit (%): The percentage increase from entry price required to trigger a take-profit exit.

FAQ

How do I interpret the buy signal?

A buy signal occurs when the 200 MA and 50 MA are both trading above the 100 MA, suggesting the price is preparing for a volatility breakout from a compressed state.

Which timeframe works best for this strategy?

Based on historical testing, the 1-hour timeframe is recommended for identifying the most reliable setups with this specific combination of moving averages.

How can I access Low volatility Buy w/ TP & SL?

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