Range Break Failure

What It Does

Range Break Failure runs on daily bars. On every session close it computes the rolling high and low over the prior N sessions, excluding today, and checks today’s close against those edges:

• If today’s close is above the rolling high, an up-break is recorded.
• If today’s close is below the rolling low, a down-break is recorded.

Once a break fires, the strategy starts a short “failure watch” window. For the next few sessions, it checks whether the close prints back inside the original range. The first session that does so triggers the trade:

• A failed up-break leads to a SHORT entry at that close.
• A failed down-break leads to a LONG entry at that close.

The trade is held for a fixed number of sessions and then flattened. There are no stops, no targets, no trend filters. If the failure window expires without a re-entry into the range, the watch is cleared and the strategy resumes scanning for the next break.

The side filter controls which failure direction is taken. Long-only takes failed down-breaks; short-only takes failed up-breaks; both takes either.

Why The Failed Break Matters

A clean breakout often runs. A breakout that fails the next few sessions has different information content: the move was rejected by the same range it just escaped. Liquidity providers, stop-runners, and trapped breakout buyers all leave footprints that can spill into the next several bars. The thesis here is that the failed break is a richer signal than the break itself, and that fading it captures a small reversion edge.

The size of that edge is not large and is sensitive to the rolling-range length and the failure window. A 20-session range catches different setups than a 50-session range; a 1-bar failure window ignores slow reversals that a 3-bar window would catch. The presets sweep these knobs across a few sensible starting points.

Presets

Five presets ship out of the box:

• 20-Bar Both Sides: the balanced starting point. 20-session range, 3-bar failure window, fade both directions.
• 20-Bar Long Only: same range and window, but only takes failed down-breaks as longs. Skews exposure to the equity-index long bias.
• 50-Bar Both Sides: widens the range to about two months of sessions. Triggers fewer trades on more meaningful breaks.
• Tight Failure Window: the same 20-session range but requires the failure to materialize the very next session. A stricter filter.
• Long Hold Both Sides: holds each fade for 15 sessions instead of 5. Gives the reversion thesis room to play out.

Use the form to set your own lookback, failure window, side, and hold; the presets are starting points, not endpoints.

Best In

• Markets with documented range-and-reverse behavior. US equity index futures and gold are the canonical candidates.
• Daily-timeframe research. The strategy is designed for 1D bars and does not look at intraday detail.
• Studies that want a clean baseline for “fade the failed break” before adding filters. Once lookback, window, and hold are fixed, there is nothing else to optimize.

Where It Struggles

• Strong trends that break the range and never come back. The strategy waits out the failure window, sees no re-entry, and moves on, but it gives up the trend trade in the process.
• Choppy regimes where price oscillates around the range edges. Lots of weak breaks fail and re-fail, producing many small losses that add up.
• Markets with structural skew. The two-sided preset can be especially exposed on commodities that drift one way for long stretches.

Possible Uses

• A control strategy for any “fade the breakout” idea: a more elaborate setup whose returns track this baseline is not adding much.
• An honest stress test of the failed-breakout thesis on whatever contract you care about. The same parameter set can be sampled across regimes.
• A starting point for layered strategies. The failure signal can be combined with a volatility filter, a regime filter, or a session-of-week filter to see if the edge sharpens in some conditions.

What It Does Not Do

• No stops, no targets, no volatility-adjusted sizing. The hold is a fixed number of sessions.
• No re-entry while in position. Once a fade is open, new breaks are ignored until the position flattens.
• No awareness of overlapping setups. If a fresh break fires while a failure watch is already armed, the new break is ignored until the active watch clears.
• No intraday entries or exits. Orders fire only on daily-bar closes.