Traffic Light Strategy on BOLT: A Smart Price Action Breakout System

The Traffic Light strategy on BOLT in the Lemonn app is built for traders who want a simple yet structured way to trade reversals and breakouts. It uses a clean two-candle pattern to identify shifts in market control, then waits for confirmation before triggering a trade. The result is a system that feels intuitive on charts, but still follows strict rules.

What is the Traffic Light Strategy?

The Traffic Light strategy is a price action-based breakout system built around a two-candle reversal pattern.

It identifies moments where control shifts between buyers and sellers, then sets up breakout levels based on that shift.

On BOLT, it provides:

• Real-time breakout alerts
• Clear entry levels for both directions
• Predefined stop-loss and target

How It Works on BOLT

Once you apply the strategy:

• The system scans for valid two-candle patterns
• Marks breakout levels automatically
• Waits for price to break either side
• Triggers a signal when breakout happens

Only one direction is taken per setup, ensuring clean execution.

Core Concept: The “Traffic Light” Pattern

At the heart of this strategy is a simple idea, a shift in momentum.

The Pattern

• A green candle followed by a red candle, or
• A red candle followed by a green candle

This pair signals a short-term reversal or pause in trend.

Breakout Logic

Once a valid pair is formed:

• The highest high of the pair becomes the upper breakout level
• The lowest low becomes the lower breakout level

Trade Triggers

• Break above high → Buy Call (CE)
• Break below low → Buy Put (PE)

When one side triggers, the other is automatically cancelled.

Entry Modes

For Call (CE) Trades

Blocked only if:

• RSI is above 70 for 2 candles, AND
• Price closes at or below EMA

For Put (PE) Trades

Blocked only if:

• RSI is below 30 for 2 candles, AND
• Price closes at or above EMA

Both conditions must be true to block a trade.

This ensures filtering is strict but not overly restrictive.

Moving Average Structure

• Uses a 15-period SMA
• Applies an EMA on the SMA

Trade Structure

• Buyer-only strategy
• Trades ATM Call (CE) or Put (PE)
• One direction per setup

This keeps execution focused and avoids conflicting positions.

Stop Loss and Target

Dynamic Stop-Loss

• Based on the opposite side of the candle pair
• Includes a small buffer (default 0.01 percent)

Example:

• CE → SL below pair low
• PE → SL above pair high

Target Logic

• Based on the range of the candle pair
• Default risk-reward ratio → 1:1.2

Example:

• CE → breakout level + range × RR
• PE → breakout level − range × RR

Smart Execution Control

Mutual Cancellation

• Both CE and PE setups share a GroupID
• When one triggers, the other is cancelled automatically

This ensures only one trade is taken per pattern.

Trade Execution Experience

On BOLT, the strategy is designed for clarity and control:

• Breakout levels are clearly defined
• Signals appear in real time
• Entry, SL, and target are structured
• Trades can be executed instantly

Risk Management Framework

The strategy controls risk through structure:

• Stop-loss based on price levels
• Fixed risk-reward ratio
• No overlapping trades from the same setup

This helps maintain discipline even in fast markets.

Market Behavior and Performance

Works Best In

• Breakout-driven markets
• Reversal zones
• Short-term volatility shifts

Challenging Conditions

• Low volatility markets
• Fake breakouts

In such cases, structured stop-loss helps manage downside.

Who is This Strategy For?

Traffic Light is ideal for traders who:

• Prefer price action setups
• Want clear breakout levels
• Like flexibility between filtered and unfiltered trading
• Trade intraday FnO

Key Takeaways

• Traffic Light is a two-candle breakout strategy on BOLT
• Uses simple price action to identify setups
• Offers both raw and filtered trading modes
• Includes structured SL and target logic
• Ensures only one trade per setup using smart controls

FAQs