Bollinger Band Breakouts with Consolidation Filtering and ATR Risk Sizing

Summary

This trend-following system uses Bollinger Bands to enter breakouts while avoiding periods classified as consolidation. The bands use a 20-period moving average and two standard deviations. Consolidation is defined as band width falling below half its own moving average; outside those periods, a close crossing above the upper band signals a long, while a cross below the lower band signals a short. A 14-period ATR sets the stop distance, and the target is placed at twice that distance. Position size is calculated from a stated 1% equity risk limit and the ATR-based risk measure.

The document describes the rules, risks, and possible refinements, and provides BTC/USDT futures backtest settings spanning multiple years. It does not report test results, so claims about signal quality or risk control are not demonstrated by performance evidence. The described 2:1 reward-to-risk convention is reflected in the target distance, though the source's position-size formula also divides by that ratio, which merits implementation review. False breakouts, reversals, slippage, transaction costs, and parameter sensitivity remain material limitations.

Key ideas

• The strategy enters when price crosses a Bollinger Band outside its defined consolidation state.
• Consolidation is identified by band width being less than half its moving average.
• ATR sets stop distance, with the profit target placed at twice that distance.
• Position size is based on equity risk and ATR, with a stated 1% risk limit per trade.
• Backtest settings are provided, but no results are given and execution costs are not quantified.

Tags

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