Crude Oil Short Breakout Strategy Using Range, Volume, and Wilder Averages

Summary

This intraday strategy looks to short crude oil when a five-minute candle signals a downside breakout. The signal requires both candle range and volume to exceed three times their respective averages over a 276-bar lookback, with the candle closing below its open. Three Wilder averages of the low are then compared to confirm a descending trend structure before a market short is opened.

The rules set a stop loss of 60 and a profit target of 30. Position size is calculated from cumulative strategy profit, so it varies with prior results. The author says the system is running on a US crude oil contract, but provides no backtest, performance statistics, or execution details. The description also contains an unclear explanation of the lookback period and does not establish whether the profit-based sizing formula remains positive or appropriately bounded after losses. Results may depend on contract specifications, data, and trading costs.

Key ideas

• The short-entry signal requires an unusually large bearish candle and unusually high volume relative to a 276-bar average.
• Three Wilder averages of lows must align in descending order to confirm the downtrend.
• The strategy uses a fixed stop and target, with the stop distance twice the target distance.
• Position size changes with cumulative strategy profit, but the document gives no validation of this sizing rule.
• The author reports use on a crude oil contract but supplies no performance evidence.

Tags

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