Volatility Range Breakout Strategy [wbburgin]

26. Apr. 2023

The "Volatility Range Breakout Strategy" uses deviations of high-low volatility to determine bullish and bearish breakouts.

HOW IT WORKS

• The volatility function uses the high-low range of a lookback period, divided by the average of that range, to determine the likelihood that price will break in a specific direction.
  
• High and low ranges are determined by the relative volatility compared to the current closing price. The high range, for example, is the (volatility * close) added to the close, the low range is this value subtracted by the close.
  
• A volatility-weighted moving average is taken of these high and low ranges to form high and low bands.
  
• Finally, breakouts are identified once the price closes above or below these bands. An upwards breakout (bullish) occurs when the price breaks above the upper band, while a downwards breakout (bearish) occurs when the price breaks below the lower band. Positions can be closed either by when the price falls out of its current band ("Range Crossover" in settings under 'Exit Type') or when the price falls below or above the volatility MA (default because this allows us to catch trends for longer).
  

INPUTS/SETTINGS
The AVERAGE LENGTH is the period for the volatility MA and the weighted volatility bands.

The VOLATILITY LENGTH is how far the lookback should be for highs/lows for the volatility calculation.

Enjoy! Let me know if you have any questions.