Intraday Breakout

Here the elementary trading algorithms obtained by checking intraday breakouts, i.e. whether the price is above or below the overlay, are described.

List of Algorithms

In this case, the overlay is the base indicator. The elementary trading algorithms derived from the breakouts of overlays are:

Overlay upside breakout
Overlay downside breakout

Hence:

MA of base indicator upside breakout
MA of base indicator downside breakout

For instance:

MA of Donchian channel upper line upside breakout
MA of Donchian channel upper line downside breakout

Description

Definition of Breakout - Intraday

Upside and Downside Breakout

Trading Conceiver considers an upside breakout to occur when the price is above an overlay. Conversely, a downside breakout occurs when the price is below an overlay. The check in made intradaily, not only at close. So these algorithms are known not only at close, but throughout the day from open to close, i.e. intradaily.

Threshold

This is the reason why we call the period between open and close, excluded, threshold, instead of intraday. During the threshold period we usually check for thresholds, or levels, breakout. The threshold phase does not include the open and the close. At open and close the price is univocally defined, while during the threshold we have a full range of values. This definition is even more appropriate considering that the bars of the historical data don't necessarily represent days. So breakout algorithms are known at open, threshold and close.

Stricter Definition - Step

Strictly speaking, the breakout is only when the price moves above or below a certain level. So, for instance, the upside breakout refers only to the moment when the price passes from below to above the overlay. If you want to adopt this stricter definition, select the Step checkbox of the breakout algorithm.

Intraday Algorithms

As all algorithms active intradaily, they appear in blue in the Composer Tree. When inserted in one of the slots through the selection buttons, an 'i' appears signaling that.

Values of the Overlay

Overlays are recalculated at close. Therefore, they can change their value only at close. This is true even if price values other than close are used, as selected in the Indicators tab, in the For price use pane, because they are all quantities known only at close, not during the day. The rationale behind comparing the price with the overlay is to use the most recent datum available for the overlay. For this reason the comparison is made through the following quantities:

At open
Open price vs. overlay calculated at close of previous bar.
At threshold
Upside breakout: high price vs. overlay calculated at close of previous bar.
Downside breakout: low price vs. overlay calculated at close of previous bar.
At close
Close price vs. overlay calculated at close of current bar.

Overlay Upside Breakout

This algorithm checks, intradaily, whether the price is greater than the MA of the base indicator, which is always an overlay. So the algorithm is true if and only if

  at open      : open  > MA (base indicator) of previous bar
  at threshold : high  > MA (base indicator) of previous bar
  at close     : close > MA (base indicator) of current bar

Overlay Downside Breakout

This algorithm checks, intradaily, whether the price is less than the MA of the base indicator, which is always an overlay. So the algorithm is true if and only if

  at open      : open  < MA (base indicator) of previous bar
  at threshold : low  < MA (base indicator) of previous bar
  at close     : close < MA (base indicator) of current bar

Examples of Application

Step-Like in Charts

As explained and exemplified in the Charts chapter of the manual, the correct way to chart breakouts is through the step-like option, not the standard one. This is exactly what we will do here.

Overlay Upside Breakout: Threshold (Intraday)

Traditionally, an upside breakout is traded opening a long position when it occurs. The advantage of the trading algorithms described here is that they operate intradaily, not only at close. For this reason they act right away, without waiting for the close. They act faster, as soon as possible. This offers a great potential advantage to profits. If we select, for instance the

  MA of Donchian channel 
    upper line upside breakout

algorithm and chart it, we can see in this example that the price breaks the overlay level during the day. The algorithm signals that intradaily, without waiting for the close, where the price is higher. When opening a long position, the lower the price, the better. By acting intradaily, an extra profit is realized, equal to the difference between the closing price and the overlay level.

Overlay Upside Breakout: Open

The same considerations of the previous example hold when it is the opening price to break out. By taking the same algorithm as before, we can see here that the open is higher than the overlay level. The algorithm signals that starting at open, without waiting for the close, where the price is higher. This time, the extra profit is the difference between the closing and opening prices.

Overlay Upside Breakout: Step

As usual, if you want to act only when the actual breakout happens and not whenever the price is higher than the overlay, you can activate the Step checkbox option. Compare this with the first example.