In this tutorial I demonstrate how to create a simple breakout strategy together with a target, stop and trailing stop. The target and the stop are based on a multiple of the average true range (ATR). The tutorial also shows a way of drawing the various levels on the chart to help you visualize what is happening.
Since the ATR value varies, so does the target value. With the stop I demonstrate how to ensure that the stop gets ‘tighter’ even if the ATR increases in value.
The trailing stop is based a multiple of the minimum move of the instrument on the chart. The trailing stop functionality looks for price to move a certain distance from the entry price before starting to trail by a user defined amount.
Once the parameters look correct, I recommend that you turn off the drawing objects by making the user input: DrawLines equal to false. The drawing objects are drawn using the TL_new reserved word. Although some of the lines look like continuous plots, in reality they are made up of many tiny straight line segments.
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Inputs
ExtremeLength( 20 ), // The number of bars over which highest high is calculated
ATRLength( 14 ), // The number of bars over which lowest low is calculated
StopATR( 2 ), // Multiple of ATR used to calculate stop value
TgtATR( 2 ), // Multiple of ATR used to calculate target value
TrlKickIn( 10 ), // Price must move in this number of ticks from entry price for the trail to start
TrlAmt( 5 ), // How much the trailing stop trails by
DrawLines( True ); // If set to TRUE lines are drawn on chart for channel, stops, and trailing stops
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Video 1 | Creating the breakout channel and calculating stops and targets
Video 2 | Calculating and drawing the trailing stops
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Please email me at martyn.whittaker@markplex.com if you spot any bugs or errors.
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