Support-Resistance breakout

This trading strategy identifies trend reversals based on dynamic support and resistance levels calculated over a specified lookback period. It generates buy signals when the price is above the resistance level and sell signals when below the support level.

To trade this strategy manually on TradingView:

• Set the SR lookback length to 21 bars.
• Identify high points where the last three bars form a peak with conditions "high[5] < high[4] < high[3] > high[2] > high[1]".
• Identify low points where the last three bars form a trough with conditions "low[5] > low[4] > low[3] < low[2] < low[1]".
• Calculate rolling sums of highs and lows over the last 21 bars to find the average of these points.
• Determine the resistance value (hval) at the highest peak within 21 bars and support value (lval) at the lowest trough.
• Establish a trend indicator that becomes positive (1) when the close is above both the resistance and support and negative (-1) when below both.
• Buy (long position) when the trend indicator turns positive and the current close is above the resistance level.
• Sell (short position) when the trend indicator turns negative and the current close is below the support level.
• Close long positions when the trend turns negative and close short positions when the trend turns positive.
• Use bar color to indicate trends and positions: green for long, red for short, white for uptrend, orange for downtrend, and blue otherwise.

Improving the Support-Resistance breakout strategy manually involves refining entry and exit points, considering additional technical indicators, and incorporating price action analysis. Here's a structured plan to enhance the strategy:

• Refine SR Levels: Instead of relying solely on the SMA differential for alternate support and resistance (SR) levels, enhance precision by integrating volume-weighted average price (VWAP) as it takes into account both price and volume, providing a more dynamic SR level.
• Optimize Lookback Period: The default 21-bar lookback may not suit all trading styles or timeframes. Adjust the period based on the volatility and trend characteristics of the asset being traded, implementing a shorter period for a more reactive strategy or longer for more confirmation.
• Price Action Confirmation: Incorporate candlestick patterns at SR levels for extra confirmation of a breakout. For example, a bullish engulfing pattern on a resistance level breach may reinforce a long entry, whereas a bearish pattern on support breach could strengthen a short signal.
• Use Multiple Timeframes: For greater reliability, look for SR breakouts that occur concurrently on multiple timeframes. If a breakout on a 15-minute chart coincides with one on an hourly chart, this multi-timeframe confirmation can signal a stronger trade opportunity.
• Momentum Indicators Addition: Add momentum indicators like the Relative Strength Index (RSI) or the Moving Average Convergence Divergence (MACD) to support your decision-making. An RSI reading above 70 or a MACD crossover could align with a resistance breakout for long entries and the opposite for short entries.
• Implement Risk Management: Define a maximum risk per trade and include stop-loss orders, ideally just below support for long trades and above resistance for short ones. Adjust stop-losses as the trade progresses to lock in profits or minimize potential losses.
• Adaptive Exit Strategy: In addition to SMA differential exits, consider using trailing stops or exiting a portion of the position at predetermined profit targets to capture gains while allowing the remainder of the position the opportunity to run.
• Backtesting and Optimization: Manually backtest your adjusted strategy on historical data to ensure that your modifications lead to an improved performance. Iteratively refine parameters and indicators based on backtesting results.

This strategy suits active traders who have the ability to monitor the markets regularly and can respond swiftly to breakout signals. The use of fractals for high/low confirmation introduces a lag that requires traders to be patient and wait for the right conditions before entering a trade. It's most effective for:

• Intraday traders: who capitalize on small price movements within a single trading day.
• Swing traders: who hold positions for several days to capture gains from short-term trends.
• Technical analysis enthusiasts: comfortable with using indicators like simple moving averages (SMAs) and fractals to inform trading decisions.

Its reliance on dynamic support and resistance levels aligns well with a trading style that emphasizes technical chart patterns and price action. Traders who thrive on volatility and price momentum will find this strategy particularly useful, as it aims to enter trades during potentially strong price moves following a breakout.

• Strategy dynamics: Trades are triggered by price breakouts from fractal-based support and resistance levels, with alternate levels calculated using the differences between high and low SMAs.
• Automation potential: Scripted for TradingView, allowing for automated signal generation and trade execution, paired with manual oversight for optimization.
• Manual trading feasibility: Can be executed by hand using fractals and SMAs on TradingView charts; suitable for traders who prefer hands-on control.
• Alert utilization: Set up TradingView alerts on breakout events to prompt timely manual analysis, ensuring you don't miss entry or exit points.
• Optimization strategies: Integrate additional indicators like RSI or MACD for momentum confirmation, adjust lookback periods, and apply multi-timeframe analysis for increased accuracy.
• Risk management: Includes stop-loss placements and trailing stops to protect from losses and lock in profits, critical for strategies with lag elements that might otherwise lead to significant retracements.
• Trader profile: Favors intraday and swing traders adept with technical analysis and who are able to respond to trade alerts with quick decision-making.