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Hello everyone, I want to share with you my "Neutral Zone" system. I have been testing it with good results for a year, especially in marked trends. The basic idea is to detect areas of lateral consolidation within a strong trend and operate the ruptures with strict risk management. I only use price action, volume and a simple volatility filter (ATR 14
It seems too simple to be consistent. Have you tried different assets or only applied it in forex?
I apply it mainly in forex: EUR/USD, GBP/USD, USD/JPY and AUD/USD. It also works well in some indices such as the DAX or SP500. The key is the quality of the range, not the instrument.
The problem is that ranges are often traps. They break you to one side and turn on the other. How do you filter the fake breaks?
Very good question. I use two filters: I only operate ruptures with volume above the average of the last 20 candles. If the ATR is too low, I discard the break because it usually indicates lack of interest. This greatly reduces false entries, although some always there.
Doesn't sound bad. Do you use any specific hours to operate? Asian session breakups are usually pretty loose.
Exactly. I prefer to operate only the ruptures that occur during the European and American opening. In Asia only possible setups and frames.
Your system reminds me a lot of classic breakout strategies. What makes it different? Just the volume filter?
The difference is in patience to select the right range. Most enter the first breakout you see. Here I expect clear consolidations, with at least 20 side candles, without inclination. The previous structure is also key.
Sounds nice about the paper, but I want to see real statistics. Do you have serious backtest or forward test, or is it just "I'm doing well"?