Bollinger Band and ATR Filters for Low-Volatility Breakouts

Summary

This strategy looks for potential breakouts after volatility contracts. It measures volatility with Bollinger Band width and ATR divided by the closing price, then compares each measure with a threshold interpolated between its rolling minimum and maximum. A market is classified as sideways when band width falls below its threshold; a long signal additionally requires normalized ATR below its threshold and price within 2% of the Bollinger midline. The described defaults use a 20-period band, a standard deviation factor of 2, a 14-period ATR, and percentile settings of 25 and 30.

The document gives the signal rules and published backtest configuration for BNB/USDT futures on an hourly timeframe over roughly one year, but reports no performance statistics. It describes only long entries and provides no explicit exit or stop-loss logic. The author flags false breakouts, parameter sensitivity, sparse signals, and the possibility that strong trends will make the sideways-market logic unsuitable. Suggested extensions include trend and volume filters and a defined exit plan.

Key ideas

• The strategy treats narrow Bollinger Bands as evidence of a sideways, low-volatility market.
• It normalizes ATR by closing price and uses rolling-range interpolation to set volatility thresholds.
• A long entry requires low band width, low normalized ATR, and price close to the Bollinger midline.
• The published rules do not specify exits or stops, and the document reports no backtest results.
• False breakouts, sensitivity to parameters, and infrequent signals are stated limitations.

Tags

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