Bollinger Band Breakouts with Candle-Based Exits and Stops

Summary

This strategy uses Bollinger Bands to enter in the direction of a breakout and a subsequent candle pattern to exit. The bands use a 20-period simple moving average and a two-standard-deviation width. A bullish candle enters long when the average of its open and close is above the upper band; a bearish candle enters short when that average is below the lower band. Long positions close on a bearish candle with both open and close below the upper band, while shorts close on the reverse condition. Stops are placed at the entry candle’s low for longs and high for shorts, and position quantity is sized using account equity with three-times leverage.

The published backtest settings specify BTC/USDT futures on Binance from December 2019 through December 2024, but no performance figures are provided. Despite the title’s four-hour framing and discussion of consecutive exit candles, the supplied settings use daily bars and the code exits on a single qualifying candle. The document warns that ranging markets can create repeated false breakouts, leverage can magnify losses, and candle-extreme stops may be wide. It proposes trend and market-condition filters and volatility-aware risk controls for further study.

Key ideas

• The strategy enters when a directional candle’s open-close midpoint crosses beyond a Bollinger Band.
• The bands use a 20-period moving average and a two-standard-deviation range.
• A bearish candle below the upper band closes a long; a bullish candle above the lower band closes a short.
• Stops use the entry candle’s low or high, and position sizing is based on equity with three-times leverage.
• Published backtest settings use daily BTC/USDT futures data, with no performance results reported.

Tags

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