Breakout Systems

Breakout systems buy when price makes a new high over a set period and sell on a new low. Here is how channel breakouts work, the famous traders who used them and what our SPY test showed.

Channel breakouts

A breakout system tracks the highest high and lowest low over a lookback period, such as 20 or 55 days. When price breaks above the high, it buys; when price falls below a shorter-term low, it sells. This idea is often called a Donchian channel, after Richard Donchian, an early trend-following pioneer.

A breakout clears the top of a price range.

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