Weekly Range Breakout: The Worst Median We Measured

Price moving beyond the previous week's range signals the start of a new move. Breakout logic in its simplest form.

Weekly range breakout: the condition

A close above the highest high of the previous five bars goes long, below the lowest low goes short. The position is held until the opposite signal, so the rule is almost always in the market.

The worst median of the rules tested

Run with the portal's own engine over 518 daily bars for each of 12 pairs, costs of 1 pip round turn, canonical parameters. The method and its limitations are set out in how we run backtests.

• Median return — -10.98%, profitable on 4 of 12 pairs
• Sharpe — -0.75, drawdown — 17.2%
• Trades — 25, win rate — 32%, time at risk — 98%
• Extremes: EURJPY +10.2%, NZDUSD -26.2%

Why false breakouts cost twice

The worst median of the ten rules and the deepest drawdown, above seventeen percent. The cause lies in the nature of a breakout: false exits beyond a boundary happen more often than genuine ones, and each is paid for twice — first by entering at an extreme, then by reversing the position on the opposite signal. A weekly range is narrow enough to be touched regularly and wide enough that entry occurs far from any sensible point.

What a breakout system is missing here

Breakout systems require what this rule lacks: confirmation of the exit, a volatility filter and, above all, a mechanism for leaving a false breakout quickly. Our run measures the cost of their absence. It also explains why breakout trading is considered difficult despite an idea that could hardly be simpler. For comparison: simply holding the position on the same data returned 4.79%, and this rule did not beat it — why a benchmark is not optional.

A caveat about exiting false breakouts

The limitation that explains the worst result: the rule has no mechanism for exiting a false breakout, and in breakout systems that mechanism is the main part of the construction. We tested the signal in its pure form, and its pure form turned out to be expensive. The general limitations — a short sample, correlated pairs, a signal tested without risk management — are listed in the methodology. The data is open and the run reproduces from a script in the repository.

This material is educational and is not individual investment advice. Backtested results do not guarantee similar results in the future. Trading forex carries the risk of losing capital.