Breakout Continuation

What It Does

Breakout Continuation is a classic Donchian-channel breakout strategy. On each bar close it computes the highest high and lowest low of the previous N bars (excluding the current bar) and compares the current close to those bands:

upper = max(highs over the prior N bars)
lower = min(lows  over the prior N bars)

long  if close > upper
short if close < lower

When a breakout fires, it enters at market with a fixed-points bracket: take-profit and stop-loss, both expressed in instrument points. The bracket fully manages the trade, so each trade is closed by either leg, never by another signal.

The strategy is bidirectional. It will short a breakdown of the lower band just as readily as it will buy a breakout of the upper band. The two sides are independent setups.

A configurable cooldown skips the next M bars after each entry, useful when a single expansion candle would otherwise produce back-to-back signals on slightly higher closes.

Key Characteristics

• Bidirectional: long on upside breakouts, short on downside breakdowns
• Donchian-channel logic: pure rolling Max of highs and Min of lows over the configured period
• Fixed-points bracket exits; take-profit and stop-loss set at submission time
• One position at a time; the bracket fully manages the trade
• Optional cooldown bars to avoid stacking on the same expansion candle

Known Weaknesses

• Choppy markets are brutal. False breakouts are the dominant failure mode; expect long stretches of small losses when range trading dominates
• The strategy works best on instruments that genuinely trend (equity indices have been the strongest historically). Backtests on metals (GC) and energies (CL) at intraday timeframes have shown profit factors hovering near 1.0, with deeper drawdowns
• Fixed-points sizing. A 200-point bracket is sensible on NQ but enormous on GC or ES; defaults are tuned for NQ and need re-sizing per instrument
• Asymmetric risk/reward is the friend here. With a 35-40% win rate typical for breakout systems, a 2:1 (or wider) reward-to-risk ratio is what keeps profit factor above 1
• No volatility or volume filter. The placeholder description mentioned both; this version intentionally ships without them to keep the rule set transparent

Best In

• Trending equity index futures (NQ has been the strongest in recent backtests)
• Higher timeframes (1H and above) where breakouts have more room before mean-reversion sets in
• Periods of expanding volatility where breakouts are more likely to follow through
• Use cases where wider risk/reward (2:1 or more) compensates for the structurally lower win rate