A Bollinger Band Trend Strategy for Commodity Futures

Summary

The document outlines a daily trend-following strategy for commodity futures based on Bollinger bands. It enters long when price breaks above the upper band and short when price breaks below the lower band, then exits when price crosses back through the moving average. It also discusses filtering the futures universe for liquidity, sizing exposure inversely to ATR-based volatility, adjusting portfolio leverage, and optionally using open-interest changes to scale entries or wider bands for profit taking.

The reported backtest uses a modified version of the approach, removing several of those risk and sizing adjustments and selecting contracts by a trend-strength measure. Results are shown across multiple years, including losing years and substantial drawdowns. They are historical backtest figures, not evidence of future performance; the text also notes practical issues such as contract rolls, lead-contract selection, parameter choices, and order execution, and calls for out-of-sample or live evaluation.

Key ideas

• The strategy enters on breaks beyond Bollinger bands and exits on a return across the middle average.
• The article discusses liquidity filters and ATR-based leverage controls for commodity futures.
• Open-interest changes can be used to reduce position size when participation weakens.
• The presented backtest uses modified rules and a trend-strength contract selection filter.
• Historical results include negative years and drawdowns, while roll and execution details remain implementation challenges.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.