Three-Candle Bollinger Band Breakout with Fixed Risk-Reward Exits

Summary

This trend-following setup looks for three consecutive candles closing outside the Bollinger Bands. A long signal requires all three candles to be bullish and each close to sit in the upper half of its range; a short signal applies the corresponding bearish conditions below the lower band. The published configuration uses a 20-period band with a standard-deviation multiplier of 2. Entries are allowed only when there is no open position.

The stop is placed at the low or high of the earliest candle in the three-candle sequence, and the target is set to match the entry-to-stop distance, creating a fixed 1:1 risk-reward ratio. The document supplies a BTC/USDT futures backtest window but no performance figures, so it does not establish whether the pattern is profitable. It notes that strict confirmation can miss trades, signals may fail in ranging markets, and the fixed target can limit participation in stronger trends. A distant extreme-based stop may also be wide during volatile conditions.

Key ideas

• Long and short entries require three consecutive closes beyond the corresponding Bollinger Band and candle-direction confirmation.
• Each signal candle must also close in the appropriate half of its high-low range.
• The earliest candle’s extreme sets the stop, and the target uses a 1:1 risk-reward distance.
• The backtest settings are provided without reported performance results.
• Strict signal requirements, ranging markets, and wide stops in volatile conditions are cited limitations.

Tags

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