Breakout Detector

Significant levels have: multiple touches (3+), visibility on higher timeframes (daily/weekly), and have held over extended time. The more times a level has been tested and held, the more significant a breakout through it becomes.

No - wait for confirmation. Price often briefly breaks levels then reverses (false breakout). Wait for: 1) candle CLOSE beyond level, 2) above-average volume, 3) ideally follow-through next bar. Or wait for retest of broken level.

Look for volume at least 1.5x the 20-day average, ideally 2x or more. Higher volume shows conviction and participation. Low volume breakouts have much higher failure rates.

Place stop on the other side of the broken level. For bullish breakout: stop below the broken resistance (now support). For bearish breakdown: stop above the broken support (now resistance). Add a small buffer (0.5-1% or ATR) for noise.

If price reverses back through the level, your stop should trigger and limit your loss. This is normal - many breakouts fail. You can also trade the failure by entering opposite direction when breakout clearly fails (false breakout trading).

Quality filters: 1) Level significance (multiple touches, higher TF), 2) Volume confirmation (1.5x+ average), 3) Consolidation (longer and tighter = better), 4) Trend alignment (with-trend breakouts higher probability). Score and only trade high-quality setups.

Retest: after breakout, wait for price to pull back and test the broken level. Enter on successful retest (level holds). Benefits: better entry, confirms breakout, higher probability. Drawback: may miss moves that don't retest. Use when you want higher probability trades.

When price breaks level then quickly reverses back through: 1) Recognize the failure (close back beyond level), 2) Enter opposite direction, 3) Stop beyond false breakout extreme, 4) Target opposite side of range. Trapped traders fuel the reversal.

Breakouts in trend direction have higher probability. Bullish breakout in uptrend = with-trend continuation. Breakout against trend is more likely to fail. Always note trend context when scoring breakouts.

Horizontal breakouts: price breaks flat S/R level. Trendline breakouts: price breaks diagonal trendline. Both are valid. Horizontal levels are often more significant as they're more widely watched. Trendline breaks can signal trend change.

Architecture: 1) Detect S/R levels algorithmically (cluster swing points), 2) Identify consolidation zones, 3) Monitor for breakout conditions (close beyond level + volume), 4) Score quality, 5) Filter by threshold, 6) Alert. Run on end-of-day or real-time depending on strategy.

Key features: Level (touch_count, consolidation_duration), Breakout (volume_ratio, break_magnitude, gap_presence), Context (trend_strength, atr_percentile, sector_strength), History (prior breakout success rate for symbol). Train classifier on historical labeled breakouts.

Measure: Bollinger Band width percentile, ATR percentile, range contraction (narrow range bars). When these reach multi-period lows, flag for potential breakout. Enter on break of contraction range high/low. Expect explosive move but direction uncertain.

Unfiltered: 30-40% win rate (many false breakouts). Volume + quality filtered: 55-65%. With retest entry: 60-70%. Edge = (win% × avg_win) - (loss% × avg_loss). Quality filtering + proper R:R produces positive expectancy.

Parameters to tune: volume multiplier, break threshold, consolidation criteria, quality score threshold. Backtest across historical data. Walk-forward validate. Use robust parameters (not overfit). Accept some trades will fail - focus on edge over many trades.