Five-Minute Forex Breakout Strategy Using Bollinger Band Contraction

Summary

This strategy uses a five-minute chart to trade breakouts in the direction of a longer term moving average. For longs, price must be above the 200 period hourly average while remaining below its upper Bollinger boundary; a rising short term average and contracting upper band provide the directional setup. Entry is a stop order above a nearby resistance level defined with a customized channel. Shorts use inverse conditions around support. The strategy exits through a dynamic Parabolic SAR, a support or resistance breach, or a late Friday close, without a fixed profit target.

The code also estimates spread by time of day, caps initial stop distance, and includes a loss threshold that can stop the system. Position scaling is described as optional and is inactive in the shared configuration. The author says the setup was tried on several forex markets but not on indices or commodities. No backtest results or performance statistics are supplied, and its parameters, spread assumptions, and intraday timing need market specific testing.

Key ideas

• The setup looks for Bollinger band contraction aligned with the direction of the shorter moving average.
• A longer term moving average and its Bollinger boundary filter whether price is eligible for a trade.
• Stop entries are placed beyond nearby support or resistance, with exits managed by dynamic SAR and price levels.
• The code estimates variable spreads and limits stop distance and total losses.
• The author reports testing on forex markets but gives no performance statistics or results.

Tags

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