Bollinger Band Range Reversals with Risk-Based Position Sizing

Summary

This strategy seeks reversals during sideways conditions. It first defines a flat regime by comparing the Bollinger basis across a lookback with an ATR-scaled tolerance. While that condition holds, a touch of the lower or upper band opens a configurable signal window. A bullish or bearish reversal signal, such as a pinbar, engulfing pattern, or fractal, can then trigger a trade in the corresponding direction. The distance to the opposite band must also meet a minimum reward-to-risk filter.

Position size is calculated from equity, a selected risk percentage, and the distance to a stop beyond a recent price extreme. The script specifies partial profit-taking at 2R and a target for the remainder at 4R. The accompanying description also mentions moving the stop to breakeven after a 1R favorable move and an emergency exit at the opposite band, although those behaviors are not apparent in the supplied code excerpt. No backtest results are given, and the approach is explicitly intended for ranges rather than strong trends.

Key ideas

• A flat Bollinger basis is used to identify conditions suitable for range-reversal entries.
• A band touch must occur during the flat regime, followed by a matching reversal signal within the configured window.
• The opposite band must offer enough projected reward relative to stop distance to pass the minimum R filter.
• Position size scales with equity and the stop distance to target a specified percentage risk.
• The description lists partial exits and breakeven management, but the provided code excerpt does not implement all of those stated behaviors.

Tags

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