Compression Breakout System — Strategy by mateosandoval1025
By mateosandoval1025
Performance Metrics
- Author: mateosandoval1025
- Symbol: NASDAQ:AAPL
- Timeframe: 1 day
- Win Rate: 58.8%
- Profit Factor: 4.33
Description
WHAT IT DOESCBS trades the volatility cycle on daily bars. Volatility is cyclical: compression precedes expansion. The system waits for a statistically quiet base, buys the first range break that comes with real participation, and rides the expansion leg on a wide trail. Long-only, designed for trending large-caps and liquid index ETFs.HOW IT WORKS1) COMPRESSION DETECTION — Bollinger Band width (20, 2) is expressed as a percentage of the basis and ranked against its own trailing 126-day distribution. A "squeeze" is a bottom-quartile reading (width percentile rank below 25). Because this is a percentile rank rather than an absolute width threshold, it self-normalizes across symbols and volatility regimes — nothing to re-tune per asset.2) TRIGGER — a close above the prior 20-day high, within 5 bars of the last squeeze reading, on above-average volume (volume above its 20-day mean), while price holds above the 200-day SMA. Location plus participation plus trend — no prediction.3) POSITION SIZING — fixed-fractional: each trade risks a configurable percentage of equity (default 4%), with the position sized off the 2-ATR stop distance and capped at 100% of equity. Volatile symbols automatically get smaller positions, and a failed breakout always costs roughly the same fraction of the account.4) EXITS — a hard stop 2 ATR under entry (failed break = thesis falsified), and a 3-ATR chandelier trail from the high-water mark. There is deliberately no profit target: expansion legs are long-tailed and the trail, not a target, books them.BACKTEST PROPERTIES (fully disclosed)All results use 0.05% commission per side, 1 tick slippage, fills on close of the signal bar, $10,000 initial capital. On AAPL daily 2005-2026 the default configuration shows +899% net, profit factor 4.33, 59% winners, max drawdown 14.4%. Split-sample with parameters frozen: 2005-2015 +164% (PF 3.35), 2015-2026 +293% (PF 4.97). Slippage stress at 5 ticks per side: +256% (PF 4.77). Cross-symbol with frozen parameters: NVDA +658% (PF 3.26); MSFT +46% (PF 1.32) — the honest miss: the system needs names that actually produce post-squeeze expansion, and low-volatility grinders barely clear costs.WHAT WAS TESTED AND REJECTED100%-of-equity sizing was rejected: the identical signal stack produced an 89% drawdown in AAPL's choppy pre-2005 era. Risk sizing is what turns a signal into a system. The backtest start/end inputs exist so any subperiod can be scored from the settings dialog without touching code.INPUTSBollinger length and multiplier; width rank window; squeeze threshold and age; breakout lookback; trend SMA length; ATR length; initial stop multiple; chandelier trail multiple; risk % per trade; backtest start/end dates.LIMITATIONSThese are in-sample backtests on liquid US equities — upper bounds on expectancy, not forecasts. The system trades infrequently (roughly 2-3 trades per year per symbol) and holds through pullbacks by design. Validate on your own symbols and windows before relying on it. Not financial advice.