Bollinger Band Breakout Pair Trading Between MCL and YG

Summary

The document describes a breakout strategy that uses Bollinger Bands calculated from a moving average and closing-price standard deviation. A close crossing above the upper band prompts a long position in MCL and a short position in YG; a cross below the lower band reverses those directions. Both positions are closed when price crosses back through the moving average. Position size can be based on a risk allocation relative to ATR.

The rationale combines directional breakout signals with relative positioning in two assets described as positively correlated. However, the source code shows a single chart instrument and does not implement explicit orders in both MCL and YG, so the pair-trading description is not demonstrated by the code. The published backtest settings instead specify a Bitcoin futures market and provide no results. The document also flags parameter sensitivity, weakening correlation, false breakouts, and the absence of a stop loss; it suggests stronger pair selection, additional filters, and loss limits.

Key ideas

• Upper- and lower-band crossings determine long or short breakout signals.
• The described pair trades long one asset and short the other, with positions closed on a moving-average cross.
• ATR and a risk percentage are used to calculate an optional position size.
• The source code and backtest settings do not verify the stated two-asset implementation or provide performance evidence.
• False breakouts, changing correlation, and missing stop-loss logic are key limitations.

Tags

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