Pivot-SAR Compression Breakout

Family: breakout · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Crypto · Timeframes: H1, H4

Thesis

Market breakouts are most reliable when they emerge from a period of volatility compression (Inside Bars) and align with both short-term momentum (HMA) and medium-term trend (SAR). By entering at structural pivot breaches and using a dynamic volatility envelope for risk, the strategy aims to capture the 'fat tail' moves of a new trend leg while exiting before mean reversion (Stochastic) or trend exhaustion (SAR cross).

Components

• Parabolic SAR (Standard) (regime) — Acts as the primary trend regime filter to ensure trades are only taken in the direction of established medium-term momentum.
• Hull Moving Average (HMA) (direction) — Provides a low-lag directional filter to confirm that the immediate price action is aligned with the SAR regime.
• Pivot Points Reversal Levels (entry) — Identifies structural breakout levels (Buy/Sell lines). Entry is triggered when price breaches these static levels formed by previous reversals.
• Stochastic Oscillator (exit) — Used for mean-reversion based exits when the breakout momentum reaches overbought or oversold exhaustion levels.
• Nadaraya-Watson Envelope (EMA Proxy) (risk) — Defines volatility-adjusted risk. The width of the envelope determines the stop-loss distance and position size.
• Inside Bars (MTF Framework) (volatility_filter) — Functions as a volatility compression filter, requiring a period of consolidation before a breakout to increase the probability of an explosive move.

Known failure conditions

• The strategy fails if price remains in a tight range for extended periods, as SAR and HMA will generate frequent contradictory signals.
• Failure occurs if the Pivot Points' repainting nature leads to entries on levels that were not visible in real-time.
• The strategy is invalidated if the Nadaraya-Watson envelope width becomes so narrow that the stop-loss is triggered by standard market noise.

Explore the full interactive blueprint with parameter ranges and evidence on WOBR StrategyVerse, or generate this strategy as an MT4/MT5 Expert Advisor with QuantMogul AI Engine (free download).