ATR-Risked Structure Continuation After a Displacement Move

Summary

This strategy seeks continuation trades after a strong directional candle, defined by its body exceeding a multiple of the 14-period Average True Range. It records that candle’s extreme and waits for a pullback that holds above the low for a bullish move or below the high for a bearish move. A candle closing in the direction of the move triggers an entry, provided the strategy is flat and its cooldown condition is satisfied.

The stop is placed at the displacement candle’s extreme, and the target is set at a configurable reward-to-risk multiple. Position quantity is calculated so the planned cash risk is a chosen fraction of current equity. The script exposes the displacement threshold, pullback window, cooldown, risk fraction, and reward-to-risk setting, but the supplied text gives no backtest results or market specification. Its rules are a systematic template; their performance under trading costs, different assets, and changing volatility remains unreported.

Key ideas

• A displacement candle is identified by comparing its body size with a multiple of ATR.
• Bullish continuation requires a later low above the displacement low, followed by a bullish candle; bearish continuation uses the inverse conditions.
• Stops are anchored to the displacement extreme, while targets use a configurable reward-to-risk multiple.
• Position size is derived from equity risk and the entry-to-stop distance.
• The document provides strategy code but no performance results or evidence across markets.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.