Dynamic Breakout System
Number of Parameters: 5
Buy/Sell Symmetric: Yes
Historical Ramp Up: 30
Optimized on market basis: No
System Submission Date: 1996
George Pruitt for Futures Magazine designed the Dynamic Break Out system in 1996. This version has done well since it was released for publication.
The key to this system is its ability to adapt its parameters to current market conditions. The foundation of the system is the tired-and-tested Donchian channel system. Richard Donchian derived this system many years ago and this is how it works: buy when the price penetrates the highest high of x days ago and sell when the price drops below the lowest low of x days back. The longer the look back the longer the system holds a trade. Mr. Donchian used different look back periods for different markets. The DBS system applies the same logic to all markets traded.
If you optimized the look back period you would find that different values work better for different markets. You would also discover that a particular market will work well for a while with one parameter and then later work better with another. In the ‘80s a 40 day look back worked best for the Japanese Yen, but today a 20 day may work better. The DBS system allows this parameter to change daily based on the current market condition. Instead of using a static parameter, this system changes the parameter based on current market volatility.
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