Bollinger Bands Breakout Strategy
Bollinger Bands Breakout Strategy is the strategy version of Bollinger Bands Filter study version, which can be found under my scripts page. The strategy goes long when price closes above the 烛台Bollinger Bands upper band and goes short signal when price closes below the lower band.
Bollinger Bands is a classic indicator that uses a simple moving average of 20 periods, along with plots of upper and lower bands that are 2 standard deviations away from the basis line. These bands help visualize price volatility and trend based on where the price is, in relation to the bands.
The strategy doesn't take 烛台Bollinger Bands into account any other parameters such as Volume / RSI / Fundamentals etc, so user must use discretion based on confirmations from another indicator or based on fundamentals. The strategy results are based on purely 烛台Bollinger Bands long and short trades and doesn't take into account any user defined targets or stop losses.
The strategy works great when the price closes above/below upper/lower bands with continuation on next bar. It is definitely useful to have this strategy or the Bollinger Bands filter along 烛台Bollinger Bands with other indicators to get early glimpse of breach/fail of bands on candle close during BB squeeze or based on volatility .
This can be used on Heikin Ashi candles for spotting trends, but HA candles are not recommended for trade entries as they don't reflect true price 烛台Bollinger Bands of the asset.
The strategy settings default is 55 SMA and 1 standard deviation for Bollinger Bands filter, but these can be changed from settings.
It is definitely worth reading the 22 rules of Bollinger Bands written by John Bollinger if interested in trading Bollinger Bands successfully.
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Bollinger Bands %B (%B)
Bollinger Bands %B or Percent Bandwidth (%B) is an indicator derived from the standard Bollinger Bands indicator. Bollinger Bands are a volatility indicator which creates a band of three lines which are plotted in relation to a security's 烛台Bollinger Bands price. The Middle Line is typically a 20 Day Simple Moving Average. The Upper and Lower Bands are typically 2 standard deviations above and below the SMA (Middle Line). What the %B indicator does is quantify or display where price is in relation to the bands. %B can be useful in identifying trends and trading signals.
Read more about the Bollinger Bands %B.
This is an revised Open Public version of Vdub Bollinger Band %B reversal indicator. This version includes optional Divergence Finder with selectable channel width, optional Market Session time highlighting and optional Binary Option expiry markers.
Bollinger Band Trading Strategy
A Bollinger Band is a technical analysis tool defined by a set of trendlines plotted two standard deviations away from a simple moving average of a security’s price.
Bollinger Bands were developed and copyrighted by famous technical trader John Bollinger, designed to discover opportunities that give investors a higher probability of properly identifying when an asset is oversold or overbought.
Very well known in the trading community, Bollinger Bands contain all trading activity occurring between the two standard deviations of the expected norm, which is also known as the trend line.
Overall, Bollinger Bands make it easy for traders to buy low and sell high.
Bollinger Bands Indicator
The Bollinger Band is an excellent indicator for measuring market volatility. The bands sum up the price movement of a stock and provide relatively high and low boundaries.
The Bollinger Band indicator is based on a moving average, which defines the ‘trend’ on the basis of the time frame that you choose to view.
How to Calculate Bollinger Bands using Formula?
The Bollinger Band formula consists of the Upper and Lower band, which make use of the Moving Average (ma). Before we move on to the formula for the bands, we have to calculate the ma.
The formula for Moving Average is:
Moving Average(ma) = SimpleMovingAverage(close, period)
The Upper Bollinger Band is the sum of the Moving Average and the standard deviations. The formula is:
Upper Band= ma+ devfactor * StandardDeviation(data, period)
The Lower Bollinger Band is the difference between the 烛台Bollinger Bands Moving Average and the standard deviations. The formula is:
Lower band= ma – devfactor * StandardDeviation(data, period)
Why use Bollinger Bands Trading Strategy?
To measure market volatility, the standard deviation formula is used. It showcases how the stock price may vary from its original value.
Bollinger Bands measure this market volatility and then adjust themselves to the market conditions accordingly. This makes the Bollinger Bands Trading Strategy so handy for 烛台Bollinger Bands traders.
Through this trading strategy, traders can find most of the price data required between the two bands, ensuring the correct market entry and exit.
How to use Bollinger Bands Trading Strategy?
There are three lines that compose Bollinger Bands: A simple moving average (middle band) and an upper and lower band.
The upper and lower bands are typically 2 standard deviations +/- from a 20-day simple moving average but can be modified.
Prices have a tendency to bounce within the bands’ envelope, touching one band then moving to the other band. You can use these swings to help identify potential profit targets. For example, if a price bounces off the lower band and then crosses above the moving average, the upper band then becomes the profit target.
Price can exceed or hug a band envelope for prolonged periods during strong trends. A strong trend continuation can be expected when the price moves 烛台Bollinger Bands out of the bands.
- When the price touches the lower bands, it signifies that the price is oversold and has a tendency to bounce back.
- When n the prices stay above the 烛台Bollinger Bands upper band for some time, it signifies that the uptrend is extremely 烛台Bollinger Bands strong
- When the price touches the upper bands, it signifies that the price is overbought and has a tendency to return back.
- When the prices stay below the lower band for some time, it signifies that the downtrend is extremely strong.
Building Bollinger Bands Strategy on Mudrex
You can create crypto strategies on Mudrex using simple ‘blocks’. You can connect multiple blocks and define conditions on those connections or ‘paths’ to create your strategy on Mudrex.
As discussed above, lets first write our entry/exit conditions so that we know what to do:
BUY: When the price goes below the lower band, it signifies that the price is oversold. When it starts recovering, then one should take a long position.
Buy when the price crosses up the lower band.
SELL: To close the long, wait for the price to go above the middle line, and then when the trend has exhausted, one should sell.