Two-Candle ATR Compression Breakout Signals

Summary

This simple breakout setup compares the combined high-to-low range of the latest two candles with a configurable fraction of a smoothed ATR. When that two-candle range is smaller than the chosen ATR threshold, it marks the combined high as a potential long trigger and the combined low as a potential short trigger. The concept treats a compact two-bar range as possible volatility compression before a larger move.

The accompanying guidance suggests using the opposite boundary as a stop and waiting for the stop-triggering candle to close before considering a countertrade. It reports that the setup works well on a 15-minute chart with an ATR duration of 25 and multiplier of 0.6, while noting that the inputs can be changed. No backtest statistics, market coverage, or transaction-cost assumptions are supplied, so the stated settings should be treated as an author suggestion rather than general evidence. The script plots candidate levels; the excerpt does not show automated order placement or a full exit and sizing framework.

Key ideas

• The setup flags a narrow range formed by the current and previous candles relative to smoothed ATR.
• The combined high and low define possible breakout triggers in opposite directions.
• The suggested opposite range boundary serves as a candidate stop level.
• The author suggests waiting for the stop candle to close before taking a countertrade.
• The document gives preferred settings for one timeframe but no quantified validation.

Tags

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