Super Breakout Strategy

Strategy Type: Intraday
Direction: Bullish
Instruments: Cash, ETF, Options

You can select the instrument type and exchange. This is a pattern-based Algo and is applicable across all instruments. You can define your own group, apply filters, decide the investment amount or quantity, and customise it as per your preference.

After a strong move or momentum phase, price often enters a consolidation. This could be a shallow pullback or a prolonged time-based correction.

When price breaks out after such consolidation, it acts as a continuation of the prior momentum.

These are known as momentum follow-through setups.

The images below illustrate different variations of these setups covering the possible ways in which price can resume momentum after consolidation.

These are referred to as super breakout patterns.

In Point & Figure charts:

• Momentum is defined by an Anchor Column
• The continuation after consolidation is known as an Anchor Column Follow-Through (AFT) pattern

A combination of multiple AFT variations forms what we call the Master AFT pattern.

Master AFT pattern setup

Master AFT is a Definedge-defined setup.

Strategy Details:

• Strategy Name: Super Breakout Strategy
• Universe: F&O Stocks (Cash segment)
• Action: Long
• Type: Intraday
• Max Open Position: 5
• Max Trades in a day: 10
• Max Day loss limit: 15,000 (User-preference and depending upon quantity)
• Square off time: 3.10 pm
• Box-size: 0.25% x 3
• Timeframe: 1-min
• Entry Condition: Master AFT Pattern above D Smart (Super breakout pattern in uptrend)
• Exit Condition: Below D Smart (Trend turns bearish)
• Market Trend Filter: Nifty intraday trend should be bullish. Nifty (0.05% x 3) above 10-SMA on one-min timeframe

Market Trend Filter

An intraday market trend filter is one of the most effective ways to improve strategy performance.

Even a strong bullish breakout strategy can struggle on days with a weak or sideways trend.
This often leads to failed breakouts and higher drawdowns.

To address this, trades can be aligned with the broader market trend.

• Execute bullish strategies only in an uptrend
• Execute bearish strategies only in a downtrend

We refer to this as the Market Trend Filter.

How It Works

If the Nifty is in a bullish trend, only bullish strategies are executed.
Bullish signals are ignored when the market is not supportive.

If the market turns bearish while holding bullish positions:

• Exit existing trades based on the exit conditions
• Avoid initiating new bullish trades

In this strategy, we have applied MTF on Nifty. The strategy will run only if Nifty is bullish.

This defines a bullish market condition.

You may use any alternative method—different charting techniques, indicators, or rules—to define market direction.

The same concept can also be applied using other indices or instruments, not just Nifty.

Filters

You can further enhance the strategy by adding filters: additional rules, indicators, or pattern-based conditions.

One effective approach is to incorporate a higher timeframe trend filter, such as the daily trend of the stock.

You can also apply intraday-specific filters to improve trade quality.

You can also modify the Max Open and Max Trades parameters. Increasing these values will result in a higher average number of trades. Change the max day loss figure accordingly.

The universe considered here is the F&O segment, as an example. You can apply this strategy in cash segment as well.

This strategy can be applied across stocks, futures, options, ETFs, and commodities—whether trading a single instrument or a group of stocks.

You can identify the pattern and trade the underlying instrument such as stocks, futures, ETFs, or commodities. Alternatively, you may trade options based on signals from the underlying.

For example, when the pattern is confirmed in the underlying, you may choose to trade the corresponding ATM call option.

You can also identify and trade patterns directly on options charts, wherever applicable.

This is a simple yet effective consolidation breakout strategy.
With the right filters, you can further refine and personalise it to suit your trading style.

You can modify it, test it, and deploy it on the Algostra.