Breakout Trading (Donchian)
Buy new highs out of tight bases — entering exactly where the market proves you right.
Momentum & BreakoutAdvanced 7 min read· Lesson 4 of 9 in Trading Strategies
Overview
Ranges are equilibrium; breakouts are repricing. Buying a legitimate range break joins institutional initiative at the point of proof — the Turtle system (20-day Donchian breaks) built fortunes on nothing else. The cost: most breakouts fail, so losers must be tiny.
Market conditions
Best from LOW-volatility bases (SQUEEZE_ON compressions) in the market's trend direction; worst in wide, sloppy, news-driven ranges.
Entry rules
Close above the prior 20-day high (DONCHIAN_BREAKOUT), ADX confirming strength, volume expanding. The full preset formula: DONCHIAN_BREAKOUT AND ADX_STRONG.
Exit rules
Trail below a shorter (10-day) Donchian low, or ride until trend structure breaks. No fixed targets on the runners.
Stop loss
Below the breakout base's top (a proper break shouldn't fall back in) — tight; or the base's bottom — safer but smaller size.
Position sizing
Risk ≤1%; tight failure point = decent size on small risk.
Risk management
Skip breakouts against the higher-timeframe trend, and never 'anticipate' one — the whole edge is paying for proof.
Evidence & backtesting
Donchian systems are among the most replicated profitable historical systems; modern markets fade obvious breakouts more, which the volume/ADX filters partially counter. The preset lets you test that claim per symbol. Every strategy here maps to this platform's Backtest panel — the matching Strategy Preset fills entry/exit/stops in one click, and every result is benchmarked against buy-and-hold, which most simple strategies LOSE to on strong trenders. Seeing that honestly is the lesson.