Bollinger Band Reversals in Flat Markets with R-Based Risk Controls

Summary

This range-reversal strategy first identifies a relatively flat Bollinger Band basis by comparing it with its value over a lookback period, using ATR to scale the allowed change. While the basis remains flat, a touch of the lower or upper band starts a configurable signal window. A bullish or bearish reversal signal within that window can trigger a trade, using pinbars or engulfing patterns; the source also requests fractal signals, though the displayed trigger logic does not use those variables. Trades are skipped unless the opposite band offers the configured minimum reward relative to the stop distance.

Position size is calculated from equity and a selected risk percentage, with stops placed beyond a recent three-bar extreme plus a tick offset. The intended plan takes partial profit at 2R and targets 4R for the rest. The explanatory text also describes moving the stop to breakeven after a 1R move and exiting at the opposite band, but those steps are not implemented in the displayed source. No backtest evidence is presented; the approach is intended for range-bound conditions and may fare poorly in strong trends.

Key ideas

• A flat Bollinger basis defines the market regime in which the strategy searches for reversals.
• A band touch during that regime starts a limited window for a bullish or bearish reversal signal.
• The opposite band must offer sufficient reward potential relative to the proposed stop distance.
• Position sizing scales with account equity and the chosen percentage risk.
• The written description and displayed code differ on breakeven and opposite-band exits, and no performance results are given.

Tags

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