Description
The ADXBreakoutsLE is a long entry strategy developed by Ken Calhoun. As it is discussed in his article “ADX Breakouts”, this strategy is to be applied to stock symbols that satisfy certain price range criteria; to find these symbols, use the ADXBreakoutsFilter study.
Based on Average Directional Index (ADX), the strategy helps spot and utilize high-volatility price breakouts. The main idea of using ADX in this indicator is a popular suggestion that high ADX values signify high levels of volatility. Values greater than 40 are perceived as a signal for strong breakout price action. Thus, the primary triggering condition is ADX crossing the level of 40, with price being at its 15-day highest (a customizable default value). If such an event occurs, the strategy records the high price and adds a simulated long entry order as soon as price exceeds this value by a certain amount. This amount is set by default to 50 cents.
Since the strategy is long entry only, you might want to use other strategies for exits, e.g., TrailingStopLX.
Input Parameters
highest length
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Defines the period upon which the highest price is determined. |
adx length
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Defines the period for ADX calculation. |
adx level
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Defines the threshold ADX value for the strategy to trigger a signal. |
offset
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Defines the minimum amount by which the price should exceed its recorded highest value. |
Further Reading
1. "ADX Breakouts" by Ken Calhoun. Technical Analysis of Stocks & Commodities, March 2016.