Most of the traded securities in capital market moves in a range for around 80% of time and trends higher or lower for 20% of the time. And when it breaks this range with high volume, a very good buying or selling opportunity is signalled. Since the inception of technical analysis, range breakout trading systems coupled with money management are considered very useful and profitable. This excel sheet will illustrate one such range breakout setup. The logic behind this setup was originally developed by Sir Tony Grabel.
Please find the AFL code of this same strategy here.
As per this range breakout method, a trade should be initiated when the price moves higher or lower than the sum of current day’s opening price and 5 days average price range.
Buy Logic: Current Price>Open Price+Average price range of last 5 days
Sell Logic: Current price<Open Price-Average price range of last 5 days
Target and Stop Loss: Indicated in Excel Sheet
- DATE,OPEN,HIGH,LOW,CLOSE: Open,High,Low,Close values of last five days for the selected security.
- Today’s Open: Today’s price at market open.
- RANGE: Average price range of last 5 days.
- BUY ABOVE: The system signals to buy when price crosses above this value.
- SELL BELOW: The system signals to sell when price crosses below this value.
- TARGET 1,2,3,4,5,6: Different profit booking targets based on your money management rules. It’s advisable to book partial profit at each target level.
- STOPLOSS: Price level at which one should exit if trade goes in opposite direction.
We have tested this trading system on many different securities. It seems highly profitable on liquid stocks and indices like Nifty, Banknifty, SBI, ITC etc. For these, the average trading volume is usually high compared to others. There are many different variations of this strategy on intraday timeframe. We’ll try to post them all going forward. Kindly download the excel sheet and explore this strategy yourself. Fell free to post any queries.