Weekly Breakout Trading Strategy AFL

  • Sep-28-2020

Here’s a simple Trend following strategy based on weekly time frame, that has performed well across 12+ years of historical data. Why weekly time frame is better than daily time frame when it comes to positional/swing trading system? Because, the noise is higher when we deal with daily time frame, however on weekly time there is enough time for the trend to get established, noise are lesser and so false breakouts are also lesser.

Moreover, no of trades becomes lot lesser, thus it helps in reducing over all transaction cost and slippages. Let’s get into the rules of this weekly trading system.

  1. Buy when weekly close is above the last two weeks high price
  2. Short when weekly close is below last two weeks low price

As simple as that, its an SAR system, means stop and reverse trading system, so the position is always open, either on long side or short side. Those who want to trade this system on equity cash segment, can stick to only long trades and those who want to trade on index like Bank Nifty, can trade on both long and short sides.

The strategy is able to capture trend reversals clearly, for example just before the crash happened in March 2020, it gave short signal in Bajaj finance and also by June 2020 the reversal in Bajaj finance started, and it clearly gave the buy signal.

It has generated good returns with lesser drawdown

Even with Bank Nifty, the weekly breakout system has performed well, with just less than 100 trades in last 10 years, it has generated 22750 points with Bank Nifty.

As long as the instrument we trade is more volatile and trending in nature, such breakout system would end up providing positive returns. However, applying the same on non trending instruments like USDINR, Currency pair, commodity might not return good results. Anyone who has filter mechanism in place to short list stocks and looking to apply trending following rules, can implement this weekly breakout trading strategy with it.

Please note that the above results considered are just a random trending instruments, there could be lot many stocks like ITC which has never moved at all for years, applying any kind of trending following strategy in such stocks would fail miserably. With trend following strategy, your 80% of over all profits comes from less than 20% of trades, so it is important to apply the trend following rules with basket of stocks or multiple instruments, so that one or the other will capture the big moves.

I have added the AFL along with this article, so users can download it and add in their own parameters like changing weekly breakout levels from two weeks to three weeks or more, add own stop loss or target levels and explore more.

Parameters

You can download the same with this link. If you liked this article, please do share share it (Whatsapp, Twitter) with other Traders/Investors. 


  • profile
    Shalini kurt
      3 weeks ago

    AFL file types are not easy for normal users to use. Please do advise alternates. thanks

    Reply 0 comments
  • profile
    Shalini kurt
      3 weeks ago

    Good Analysis. Please publish the best match outcome on weekly basis atleast to users who have paid subscription of BOTs.

    Reply 1 comments
    • profile
      Square Off
        3 weeks ago

      Hi, these are trading article researched and published for the benefits of traders community. Traders can explore more with their own additional analysis, there are no alerts/services based on this article.

  • profile
    hanu kiran
      3 weeks ago

    what will be the stoploss for this strategy?

    Reply 1 comments
    • profile
      Square Off
        3 weeks ago

      For buy trades, last two weeks low price is stop loss, for Short trades, last two weeks high price is stop loss.

  • profile
    Deepti Raghuvanshi
      3 weeks ago

    Also on daily basis closing checked in comparision previous trailing 2 weeks or is it checked on ending of a week like Friday

    Reply 1 comments
    • profile
      Square Off
        3 weeks ago

      As its weekly time frame, we have to check only on every friday.

  • profile
    Deepti Raghuvanshi
      3 weeks ago

    What are stop losses

    Reply 1 comments
    • profile
      Square Off
        3 weeks ago

      For buy trades, last two weeks low price is stop loss, for Short trades, last two weeks high price is stop loss.

  • profile
    Sachin Jadhav
      3 weeks ago

    What is AFL

    Reply 2 comments
    • profile
        3 weeks ago

      Thanks for the reply

    • profile
      Square Off
        3 weeks ago

      AFL is Amibroker Formula Language, its kind of a code which is used by advanced traders who use amibroker charting tool. Using which traders can design their own strategies and backtest it


  • Tags | algorithm trading strategy,Trading Strategy,Trading System,Breakout Trading Strategy,Trading Strategy AFL,Weekly Breakout Trading Strategy,swing trading strategy,swing trading strategy AFL,Weekly Breakout Trading Strategy AFL,Positional Trading strategy