Breakout System

I want to share about breakout technique which I am trying to do, so can be used as automatic trading or EA. Maybe coincidence or not, what I'm talking about here has been discussed elsewhere either in private or open in somewhere. And anyway, the contents of this post is not intended as recommendation to your daily trading. But at least this may be useful for traders who have similar interests to explore technical breakout.
Breakout Problem
A common problem encountered in making the trend following system is to avoid what is often called a whipsaw. If the entry technique is using a breakout system, the main problem of course is a false breakout. Even today generally it is easier and more common system against the entire breakout, like all of EA I share here.
Generally, to avoid the whipsaw, the developers of trading system to add various kinds of indicators that serves as a filter. For trend filter, a commonly used indicators such as the Average Directional Movement Index or ADX. Besides, the used period and Time Frame is also determining the number of whipsaw. The shorter the period and Time Frame that we used the more whipsaw, and vice versa.
There is also a breakout system developed using the European session as a filter. And as I recall one of popular EA that using this technique is Hans123. In this case it use a trading time as a filter instead of mathematical indicator.
King Keltner Strategy
Chester Keltner introduces King Keltner trading system in 1960. Chester Keltner creates a channel based on MovingAverage and added / subtracted with the Average True Range as an upper and lower channel. Specify a period of Moving Average and Average True Range. To create an Upper Channel, you add the Moving Average value with the Average True Range. To create Lower Channel subtracts the value of moving averages with the Average True Range.
This system is very simple, a buy signal occurs when prices penetrate the upper channel and sell signal occurs when prices penetrate the lower channel. Even with optimization, it is possible to make a stop Reversal System. But in general with this system, we will close all positions when prices turned back into Moving Average. One possible variation is the close only breakout. The buy and sell signals occur if the price closed above/below the channel.
Become an Automatic Trading System
With no specific rule to use the same period between the Moving Average and Average True Range, we can perform optimization on both these variables. Also we can try to optimize the deviation that we use. To reduce whipsaw, can be added ADX, and is also can be optimized. But as I said from the beginning I was not going to make this EA. Anyway you can search for this EA on the Internet; I think many are available for free.
This is just an introduction; in the next post I will explain what my observation is.