Guide · 15 plays
Breakouts & channels: what it predicts, and when it works
When price escapes the range it has held for weeks, the move that follows tends to run. A breakout play buys new highs (or a close above a band) and sells on a break the other way or a trailing stop.
Why it might work
A range is where buyers and sellers have agreed on value. A break means the balance has shifted, often on news, and the stops and orders sitting just beyond the range push it further.
When it fails
Most breakouts fail. In quiet, range-bound markets a breakout play buys the top of the range again and again, and each failure costs the gap to the stop.
What the research says
- Richard Donchian's four-week rule of the 1960s and the Turtle traders of the 1980s (Curtis Faith's Way of the Turtle, 2007) made channel breakouts the backbone of trend-following funds.
- Brock, Lakonishok and LeBaron (1992) found trading-range breaks had predictive power on the Dow, alongside moving averages.
- Breakout systems win well under half their trades. Their edge, where it exists, comes from a few long runs paying for many small failed breakouts.
Every breakouts & channels play, ranked
Share of stocks where each play did better than holding, since 2005 or as long as the stock has traded, after costs. Click a column to sort.Sort with the menu above the list.
| Play | Beat holding, risk-adjusted | Cut the worst fall | Beat holding on return | Calls right | Switches / yr | Time in | In now |
|---|---|---|---|---|---|---|---|
| P&F Double TopA.W. Cohen & Thomas J. Dorsey | 23% | 82% | 20% | 37% | 4.5 | 65% | 168/377 |
| Four-Week RuleRichard Donchian | 20% | 85% | 19% | 36% | 5.8 | 58% | 161/377 |
| Chandelier ExitChuck LeBeau | 19% | 83% | 17% | 35% | 8.8 | 49% | 132/377 |
| Turtle System 2Richard Dennis & William Eckhardt | 17% | 94% | 14% | 30% | 4.4 | 37% | 66/377 |
| Clenow TrendAndreas F. Clenow | 17% | 94% | 13% | 30% | 4.6 | 35% | 69/377 |
| Wilder Volatility SystemJ. Welles Wilder Jr. | 17% | 81% | 15% | 35% | 8.3 | 57% | 143/377 |
| Chande Kroll StopTushar S. Chande & Stanley Kroll | 17% | 78% | 15% | 27% | 15.4 | 55% | 151/377 |
| Turtle System 1Richard Dennis & William Eckhardt | 16% | 93% | 13% | 31% | 6.5 | 33% | 56/377 |
| Bollinger BreakoutJohn Bollinger | 14% | 88% | 12% | 33% | 10.0 | 32% | 96/377 |
| NR7 BreakoutToby Crabel | 14% | 71% | 14% | 33% | 31.3 | 53% | 199/377 |
| Darvas BoxNicolas Darvas | 12% | 90% | 11% | 35% | 5.3 | 43% | 97/377 |
| Keltner ChannelChester W. Keltner & Linda Bradford Raschke | 12% | 92% | 11% | 32% | 7.2 | 26% | 57/377 |
| TTM SqueezeJohn F. Carter | 10% | 99% | 12% | 36% | 6.1 | 10% | 43/377 |
| Bollinger SqueezeJohn Bollinger | 7% | 100% | 9% | 31% | 1.8 | 5% | 27/377 |
| Acceleration BandsPrice Headley | 6% | 97% | 8% | 28% | 8.5 | 8% | 14/377 |
When it worked
The family did best against holding in the 2008 crash (+27% median gap) and worst in the 2020–21 rally (−34%). Median gap in return against holding (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| Breakouts & channels | +27% | −12% | +23% | −34% | +11% | −12% |
Where it worked
By kind of stock: how often the family's plays beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Micro caps | 29% | -0.19 |
| Real estate | 25% | -0.15 |
| Industrials & rentals | 23% | -0.15 |
| Financials | 21% | -0.15 |
| Energy & power | 16% | -0.24 |
| Healthcare | 15% | -0.24 |
| Industrials & materials | 15% | -0.30 |
| Software & devices | 15% | -0.31 |
| Media & telecom | 13% | -0.22 |
| Big tech | 12% | -0.21 |
| Consumer & retail | 11% | -0.33 |
| Semiconductors | 9% | -0.33 |
| Metals & mining | 8% | -0.29 |
| Indexes & ETFs | 6% | -0.20 |
| Sectors | 2% | -0.31 |
How traders use it
- Expect to be wrong more often than right; the size of the wins is what matters.
- A trailing stop that widens with volatility (ATR) keeps a breakout trade alive through normal noise.
- Breakouts on single stocks are noisier than on indexes or commodities, where the systems were built.
Right now
The breakouts & channels plays hold 26% of the stock-and-play combinations Be The Puck tracks (1,479 of 5,655) as of the Oct 13, 2026 close.
See which stocks each family holds · The plays and their rules
This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.