Sublime Trading | Donchian Breakout Signals

2023年8月3日

What kind of traders/investors are we?

We are trend followers. Our scripts are designed to be used on the higher timeframes (weekly/daily) to catch the large moves/trends in the market.

Most have heard of long-term trend following. Few know how to execute the strategy.

Our scripts are designed specifically to identify and invest in long-term market trends.

What does this script do?

It produces entry signals in a confirmed bull and bear trend.

The logic is based on Donchian 20, which serves the following two purposes:

• 1. Confirms end-of-day entry points in a long-term trend
  
• 2. Filters out entry points in a sideways market
  

The signal is produced on a break and close of the Donchian 20 high in a bull trend and a break and close of the Donchian 20 low in a bear trend.

How is the entry price produced?

The entry is based on a percentage value of the range of the breakout bar added to the high of the bar in a bull trend.

In a bear trend, the percentage is subtracted from the low of the bar.

This gives an objective entry when placing a position once the OHLC of a bar is confirmed at the end of the trading day.

How is the stoploss price produced?

The script uses the formula ATR 15 x 4.

We use ATR as it produces a stoploss which is unique to the volatility of the asset. The more volatile the asset, the wider the stoploss.

We use ATR 15 as it brings an average reading across half a month, incorporating days of extreme volatility.

The multiplier 4 works well to avoid positions being stopped out prematurely on pullbacks.

When the stoploss is hit, there is when traders and investors may consider exiting positions.

What is the best timeframe to use the script?

We recommend the daily timeframe as this is where trader and investors identify and enter long-term market trends.

The higher timeframes are where traders and investors take fewer positions but hold for longer time periods.

As a result, trend followers place priority on the quality of the entry rather than quantity.

What makes this script unique?

This script has been coded specifically for the daily timeframe to:

• Highlight the start of a potential long-term trends.
  
• Confirm entry points at the end of the trading day, absorbing intraday noise.
  
• Reduce fake breakouts in a trend.
  
• Continue to create entry points as the trend develops to allow for compounding.
  
• Filter out breakouts in a sideways market.
  

This entry signal script helps traders and investors focus on the quality of a potential position when investing in long-term market trends.