What it is
The 20-bar range breakout is the oldest trend-following rule still in use: buy when price closes above the highest high of the last 20 bars, sell short when it closes below the lowest low of the last 20 bars, and get out when price closes beyond the opposite 10-bar extreme. There is no indicator, no prediction, only the observation that large moves must start by making new highs or lows. The method accepts many small losses in exchange for the handful of trends that pay for everything.
Rules
- Market / timeframe: BTC or ETH, daily candles for the classic version. The table also shows 4-hour and 1-hour so you can see what happens when the rule is applied too fast.
- Entry long: close above the highest high of the previous 20 bars. Entry short: close below the lowest low of the previous 20 bars.
- Stop / exit: for a long, close below the lowest low of the previous 10 bars. For a short, close above the highest high of the previous 10 bars. That exit is also the stop; there is no separate target.
- Position size: the table uses 100% of equity, unleveraged, so the drawdown numbers are honest. At 10x leverage every number in the drawdown column is ten times worse.
- Always flat or in one position. Reverse only after the exit fires and a fresh signal appears.
Chart example
Evidence
Our own backtest on Coinbase candles. Daily rows cover 2023-10-20 to 2026-10-19 (three years). 4h and 1h rows cover 2025-10-19 to 2026-10-19 (one year). No fees, no slippage, unleveraged.
| Market / TF | Trades | Win rate | Avg trade | Profit factor | Total return (compounded, 1x) | Max DD | Buy & hold same period |
|---|---|---|---|---|---|---|---|
| BTC 1D | 32 | 37.5% | 1.5% | 1.33 | 21.9% | 40.9% | 178.0% |
| BTC 4h | 63 | 31.7% | −0.1% | 0.97 | −12.4% | 34.4% | −24.5% |
| BTC 1h | 257 | 33.1% | −0.0% | 0.99 | −10.0% | 29.4% | −23.9% |
| ETH 1D | 31 | 45.2% | 1.5% | 1.26 | 11.1% | 34.5% | 51.1% |
| ETH 4h | 58 | 29.3% | 0.8% | 1.34 | 28.3% | 33.6% | −39.4% |
| ETH 1h | 226 | 35.8% | 0.3% | 1.24 | 51.7% | 28.7% | −39.2% |
How to read it: on the daily chart the rule made money on both coins but far less than holding BTC, and it sat through a 41% drawdown to do it. On ETH it beat a falling market on the fast timeframes because it was short for most of the year. A 30% to 40% win rate is normal for breakouts; the profit comes from the average winner being two to three times the average loser.
When it fails
- Chop. A market that keeps poking above the 20-bar high and closing back inside produces a string of 1% to 3% losses. Eight losses in a row is ordinary for this rule.
- Leverage. The exit is a trailing 10-bar extreme, which on a daily chart can be 10% to 15% away. At 10x that is a liquidation, not a stop. Breakout rules need wide stops and therefore small size.
- Late entries. On the daily chart the signal fires at the close, often after the move has already run 5%. The giveback on the exit is just as large. The rule is designed to catch the middle of a trend, not the start.
- Fees on fast charts. 250 trades a year on 1h with taker fees would turn the BTC row from flat to clearly negative.
If you want to feel what a 41% drawdown does to your decision-making, RektChat's paper desk resets a $100,000 account every day and the chart shows the same BTC/ETH index real exchanges trade.