Momentum Breakout
Catch the "something just broke" candle — before the retail entries arrive.
Trades decisive breaks of Bollinger bands and recent range highs / lows, confirmed by volume and MACD.
The idea
Prices are usually boring. They hover in a range, get absorbed by market makers, and nothing much happens. Occasionally, a new input — a news print, a liquidation, a fundamental reveal — hits the book with enough force to push price out of its statistical and structural range at the same time.
That moment is the trade. Momentum Breakout is optimized to detect it on the bar it happens, not three bars later.
Scoring
| Condition | Points |
|---|---|
| Close above upper Bollinger band / below lower | +2 |
| Close above 20-bar high / below 20-bar low | +2 |
| Fresh break of EMA(20) from opposite side | +1 |
| MACD histogram expanding in signal direction | +1 |
| Volume spike ( > 1.8× 20-bar avg ) aligned with direction | +1 |
Threshold: 4 for normal, 6+ for ✓✓ strong. 10-bar cooldown between signals.
How to use it
- Enable Momentum Breakout in the Scripts panel.
- The signal fires on the close of the breakout bar. Aggressive traders enter market, conservative traders wait for a retest of the broken level and enter on the bounce.
- Place the initial stop inside the broken range — the trade invalidates the moment price re-enters the range.
- A ✓✓ breakout without volume is rare and less reliable. If you see the label but not the volume spike, treat it as a weak setup.
Why it works
Breakouts trigger a self-reinforcing cascade: stop orders from range traders, limit orders from breakout traders, short covers from fading traders, and fresh participation from trend followers. The result is that successful breakouts tend to produce disproportionate moves relative to the bar that birthed them.
Why they fail
Two main failure modes:
- No fuel — price breaks but no volume arrives. Market makers fade it quickly. This is why the volume filter matters.
- Macro gap — the breakout was caused by an overnight news print. The entire move already happened while you were sleeping; the breakout bar is the trade, not the start of one.
Pair with Trend Following for continuation, and keep an eye on the Event Timeline so you know when a breakout is news-driven.