ATR Volatility Compression and Breakout Trading on MNQ

Summary

This strategy looks for a transition from relatively quiet trading to rising volatility, then enters when price crosses a level recorded during the quiet period. It compares ATR with a longer average of ATR, marks compression below a configurable threshold, and treats a higher ratio as expansion. While compression holds, the current bar’s high and low update the breakout levels; after compression ends, those levels remain until a signal or reset. Entries require both expansion and a close crossing a stored level, with an optional time-of-day filter.

The initial risk distance is based on ATR, with a minimum tick-based floor, and the profit distance is set as a multiple of that risk. The document provides source code and a dashboard for trade count and win rate, but gives no backtest results or market-specific evaluation. Those displayed metrics do not establish profitability. The accompanying explanation also overstates how exits are submitted: Pine strategy orders are simulated by TradingView’s broker emulator, so the code does not establish that protective orders reach a broker’s matching engine immediately. Parameter sensitivity, execution costs, and out-of-sample behavior remain unaddressed.

Key ideas

• The volatility ratio compares current ATR with a longer average of ATR.
• Compression updates the candidate breakout high and low, which remain after compression ends.
• Entries require a price cross of a stored level while the volatility ratio signals expansion.
• ATR-based risk distance and a configurable reward-to-risk multiple determine exits.
• The document supplies no performance evaluation, so the strategy’s effectiveness is unestablished.

Tags

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