Volatility Channel Breakout ATR & EMA Strategy
The Volatility Channel Breakout is a trend-following system that relies on Average True Range (ATR) to confirm valid breakouts. By combining volatility filters with moving averages, this strategy aims to filter out “fakeouts” and enter trades only when there is sufficient market energy.
Strategy Profile
Timeframe
M15 and Above
Concept
Volatility Breakout
Indicators
ATR + SMA + EMA
1. Indicator Setup
This strategy requires a specific setup involving both the main chart and indicator windows:
- Main Chart: 30 SMA High and 30 SMA Low (Creates a channel).
- Window 1 (Filter): ATR (30) with an added EMA (5) applied to the ATR data.
- Window 2 (Exit): ATR (14) with an added EMA (4) applied to the ATR data.
2. Entry Rules (Long & Short)
Long Entry (Buy)
- Price must cross above both Moving Averages (The Channel).
- Volatility Filter: The ATR (30) line must be above its EMA (5) signal line. This confirms high volatility.
Short Entry (Sell)
- Price must cross below both Moving Averages (The Channel).
- Volatility Filter: The ATR (30) line must be above its EMA (5) signal line.
Risk Management
Stop Loss
Buy: At the 30 SMA Low level.
Sell: At the 30 SMA High level.
Take Profit
Target: 3 times the risk (3:1 Ratio).
Early Exit: If ATR (14) drops below EMA (4), volatility is dying; close the trade.
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