Adaptive Trend Continuation Strategy

Strategy Explanation: This is a Trend continuation Strategy that uses directional measures to inform trade decisions.

Trend Identification: The ADX indicator measures trend strength. An ADX value above 25 signifies a strong trend, aligning with research indicating that trends, once established, tend to continue.

Entry Criteria: The strategy detects bullish flag patterns, which are known to have a high success rate in predicting upward continuations.
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A breakout from this pattern, confirmed by higher-than-average volume, serves as the entry signal.

Risk Management: The ATR is employed to set dynamic stop-loss levels, adjusting for market volatility. Position sizing is calculated based on a fixed percentage of capital at risk per trade, ensuring consistent risk management.

Exit Strategy: A stop-loss is placed at 1.5 times the ATR below the entry price, and a take-profit is set at 3 times the ATR above the entry price, establishing a 2:1 reward-to-risk ratio.

5. Known Limitations and Edge Cases:

False Breakouts: Not all breakouts lead to sustained trends. The volume confirmation filter aims to mitigate this risk, but false signals can still occur.

Market Conditions: The strategy may underperform in choppy or sideways markets where clear trends are absent.

Pattern Recognition: The simplified detection of bullish flag patterns may not capture all valid patterns or might identify false ones.