Breakout
A breakout is a move beyond a defined price range, usually a close above a recent high or below a recent low. A breakout rule enters in the direction of the move.
How Breakout is calculated
Define the range first: the highest high of the last n bars, or a drawn level. A breakout is a bar that closes above it (or trades above it, if you accept intrabar triggers). Many rules add a volume filter, a buffer such as 0.5 x ATR, or a wait for a retest.
How it is read
Breakouts are read as the start of a new move. Many fail and return inside the range, which traders call a false breakout or fakeout.
Common mistakes
- Entering on a touch, not a close, then getting stopped by a wick.
- Skipping the cost side. Breakout fills are often at poor prices because many orders arrive together.
- Defining the range by eye, so the rule cannot be tested.
Test it yourself
Use Highest (or Lowest) of the high over n bars as an operand and enter when the close crosses above it. The Lab charges trading costs on every trade, fills on the next day's open, and shows how many attempts you have made.
What Tickfloor tested
Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
- Donchian / Turtle Breakout (claim test)
- Opening range breakout, 81% win rate (claim test)
- Opening range breakout (ORB), hourly crypto version (claim test)
Lessons that cover it
Related concepts
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.