Breakout Bars for Trend Direction and Reversal Detection

Summary

This indicator is presented as an alternative to moving averages for identifying trend direction. It combines a reversal threshold with a breakout condition based on bar extremes: a qualifying bar closes above the prior high or below the prior low. The reversal calculation uses highs and lows rather than closing prices, and qualifying bars are treated as markers of a new directional segment.

An additional series buffer records how many breakout bars have occurred in each trend, and the indicator can show counts for recent reversals. The document suggests using it mainly to determine direction alongside separate entry and exit rules. It also proposes that several recent reversals with few breakout bars may indicate a flat market before a stronger move. An example describes a later trend with 20 breakout bars and an approximate move of 6,000 pips, using a reversal parameter of 1,500. This is an illustration, not a documented controlled test; no instrument, period, costs, or broader performance evidence is supplied.

Key ideas

• The indicator combines a reversal threshold with a close beyond the prior bar’s high or low.
• It calculates reversals from bar extremes rather than closing prices.
• A buffer records the count of breakout bars in each trend for use by an Expert Advisor.
• The author positions the indicator mainly as a trend-direction filter, with other rules needed for entries and exits.
• The example move and breakout count are illustrative and do not establish general performance.

Tags

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