Stock Predictor trading strategy

Channel Breakout

A price channel is the range between the highest high and the lowest low of the last m days. When the price breaks out of the channel, it is moving outside its normal trading range and the trend may be changing.

Strategy group

Price, volatility and time filters

Based on

Highest high and lowest low

Typical parameters

m = 7 days

This strategy buys when the closing price rises above the highest high of the previous m days and sells when it falls below the lowest low of the previous m days. To avoid false breakouts it is often combined with another strategy.

Trading signals

• Buy when the close is above the highest high of the previous m days.
• Sell when the close is below the lowest low of the previous m days.

Strategy rules

IF C(t) > MAX{ H(t-1 ... t-m) }
   THEN GO LONG
ELSE IF C(t) < MIN{ L(t-1 ... t-m) }
   THEN GO SHORT

Where C(t) is today’s closing price, H and L are the daily highs and lows of the previous m days.