Trading signal: Range Break-out

Description

Markets alternate phases of trend and phases where they evolve inside a range. This signal detects the periods where the market is in a range. Once a range has been detected, the signal will indicate when the market breaks out of the range.

   
Category : Trend resumption or trend reversal
Components : Horizontal range and breakout
Time frame(s) : All
Usable for buy signals : Yes
Usable for short sell signals : Yes

The example below illustrates how this signal works :

Trading signal: The market is bullish.  

The market is bullish. However, a horizontal range is detected at candle 1. The grey zone represents the range. The green edges indicate that this range comes after a bullish market (red=bearish).  
Between candles 1 and 2 the borders are green and large and the range is colored in light green. As long as the market doesn't break out of the range, it will be continued.

At candle 2 the market closes outside (under) the range. This is a signal for a short sell as indicated by the red triangle and the grey background in the chart.


Parameters

The trader can choose the direction of the signal (with the trend, against the trend or both). He can also indicate during which periods he wishes to see signals and how he will be notified :

Direction Whatever the trend.
With the trend.
Against the trend.
StartTime Start of the period of activation of the signals (e.g.: 900 for 9 a.m.)
EndTime End of the period of activation of the signals (e.g.: 1845 for 18.45 p.m.)
MessageBox A message will appear on your screen when a signal is given.
PlaySound Plays a sound when a signal is given.
SendEmail Sends an e-mail when a  signal is given.

 

When to open a position?

The signals depend on the trader's choice of parameters.

Here are a few examples :

Trading signal: Whatever the trend  

This trader chose "Whatever the trend". He will receive a signal when the market breaks out above or below the range.
This example shows a short sell signal. This can be the beginning of a trend reversal.



Trading signal: Against the trend  

This trader ticked "Go Long". Doing so, he indicates that he is only interested in buy signals.




In this example the range is detected after a bearish move. The trader who is only interested in buy signals will configure the direction of the signal to "Against the trend". At the next break out above the range he will receive a buy signal.