Pattern Breakouts Filtered by Order Book Flow and News
Summary
The document describes an automated trading system that scans for classical chart structures, including head-and-shoulders formations, bottoms, triangles, flags, and cup-and-handle patterns. It seeks confirmation before entering a breakout by measuring bid and ask imbalance and volume absorption from Level 2 order book data. When depth-of-market data is unavailable, the system is described as falling back to estimated tick volume.
Additional filters and controls include a calendar and external-source news check that pauses trading around high-impact events, an adaptive moving average trend filter, position sizing with an optional Kelly criterion, daily and weekly equity loss limits, partial profit taking, and ATR-based trailing stops. These are descriptions of proposed EA features, not reported results: the document provides no backtest, live performance, or parameter validation. DOM availability and quality, tick-volume estimates, pattern definitions, news-source reliability, and the behavior of the risk rules are left unexamined.
Key ideas
- The system scans for classical chart patterns and considers entering when a breakout occurs.
- Order book imbalance and volume absorption are used to confirm breakouts, with tick volume as a fallback when DOM is unavailable.
- A macroeconomic news filter can pause trading around high-impact events.
- Trend, position-sizing, loss-limit, partial-profit, and trailing-stop controls are included in the described design.
- No empirical performance evidence or validation of the filters is provided.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.