Bollinger Band Reversal Entries with ATR Trailing Stops

Summary

This long-only strategy looks for a possible reversal after a red candle closes below the lower Bollinger Band, entering on a subsequent green candle. It uses a 20-period moving average by default, allows several average types, and sets the band width to 1.5 standard deviations. The described risk controls include a fixed stop 12% below entry and an initial target 20% above entry; reaching that target or touching the upper band can activate an ATR-based trailing stop that tightens as price rises.

The document gives a BTC_USDT futures backtest configuration on daily bars from December 2019 to December 2024, but reports no performance results, so it does not establish profitability. The source code also differs from parts of the prose: the 20% level activates trailing protection rather than closing the position, and the date-range flag does not filter trades. The approach can generate false signals in trends and frequent trades in choppy markets; its fixed stop and ATR distance may also be poorly suited to some instruments or volatility regimes.

Key ideas

• A red candle closing below the lower Bollinger Band arms a long entry on a later green candle.
• The bands use a 1.5-standard-deviation width around a selectable moving average, defaulting to a 20-period SMA.
• A fixed stop is set 12% below entry, while a 20% rise or an upper-band touch can start an ATR trailing stop.
• The published daily BTC_USDT futures test configuration contains no reported performance evidence.
• Choppy conditions, false band signals, and volatility changes can undermine the entry and stop logic.

Tags

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