Step A — Identify the setup (volatility compression)

The agent first looks for a “squeeze” condition, such as:

• band width tightening relative to recent history

• overall volatility contracting

This is the filter that prevents overtrading during normal volatility.

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Step B — Trigger the breakout (a real escape, not noise)

Next, it waits for a stronger breakout condition:

• candle close outside the upper band (bullish)

• candle close outside the lower band (bearish)

Using the close (not intrabar wicks) helps reduce false signals.

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Step C — Confirm (avoid classic fakeouts)

To avoid “poke-out then snap-back,” the agent applies confirmation logic like:

• a second candle holding the breakout direction, or

• a break of a recent range high/low, or

• optional trend/momentum alignment (depending on your setup)

This is what turns a “possible breakout” into a higher-quality signal.

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Step D — Risk rules (clear invalidation and exits)

A breakout strategy is only as good as its fail-fast rule. Common logic includes:

• Invalidation: price closes back inside the bands (or back into the pre-breakout range)

• Exit: partial profit at a defined level, then trail using:

  • the mid-band (moving average), or

  • a volatility-based trail (e.g., ATR), or

  • swing structure

 

The agent’s job isn’t to “predict.” It’s to enforce the same decision process every time.