The n-day extreme breakout trading strategy is a very simple trend following strategy, which achieves trend following by tracking the extreme point of the ** volatility range, and going long and short at the breakout extreme point. It will go long when there is a breakout of the long extremum, and close or go short when there is a breakout of the short extremum. It does not perform well in the consolidation**, but can make very good profits in the trend**.
First, the principle of strategy
The core logic of the strategy is to identify extreme breakout patterns. The so-called "extreme breakout" means that the lowest price of the day is lower than the lowest price n days ago, or the lowest price of the day is higher than the lowest price of n days ago (for example, n:=2), which will form a "breakthrough gap". This usually signals a possible trend reversal. Specifically, the trading rules are as follows:
1. If the lowest price of the day is lower than the lowest price n days ago, and the ** price is lower than the lowest price of n days ago, it is considered that the short extreme value breakthrough is formed and the short price is shorted;
2. If the lowest price of the day is higher than the highest price n days ago, and the **price is higher than the maximum price of n days ago, it is considered that a bullish extreme breakthrough will be formed and long.
Here, the current day and the high and low prices of N days ago and the current price are used to determine the extreme breakout pattern, so as to avoid being affected by false breakouts or short-term **, and improve the reliability of pattern judgment and signal quality.
Second, the advantage analysis
Identifying the appropriate extreme breakout patterns can be a good one** a trend reversal in the future is possible.
1. The strategy logic and rules are simple, clear, and easy to understand and implement.
2. You can quickly capture new trend opportunities.
3. The cycle parameters can be adjusted to adapt to different varieties and different cycles.
Third, the judgment of the strategy risk extreme breakout pattern is not completely accurate, and if there is ** in the short term, it will also produce an error signal.
1. Poor performance in consolidation**, there will be more false signals and small losses.
2. Lack of stop-loss strategy, unable to effectively control a single loss.
Fourth, optimize the direction
1. Optimize the periodic parameters of the extreme value breakthrough pattern, find more suitable parameters, and improve the signal quality.
2. Optimize the filter conditions, add volume, **MACD indicators, etc., to improve the reliability of judging extreme breakout patterns.
3. When trading, you can add a time filtering mechanism to optimize the entry time, and re-enter the market after the trend is confirmed to avoid the adverse effects of overnight gaps.
4. Set take-profit, stop-loss and trading positions according to ATR indicators to reduce risks.
5. Summary
The n-day extreme breakout trading strategy is a basic trend-following strategy. The advantage is that the timing of the trend reversal is more accurate, but there are also certain risks. The advantage of this strategy is that the signal is highly reliable and suitable for trend-tracking varieties. If the parameters are adjusted properly, you can make a good profit in the trend**. With proper optimization, the stability and profitability of the strategy can be improved.