Three-Candle Bollinger Band Breakout with Fixed Risk Targets

Summary

This trend-following setup uses Bollinger Bands calculated from a 20-period moving average and two standard deviations. It enters long after three consecutive closes above the upper band, or short after three consecutive closes below the lower band, with entry at the third close. The stop is placed at the low or high of the first candle in the sequence, respectively, and the profit target is set at a distance equal to the stop distance, giving a stated 1:1 risk-reward ratio.

The document provides an ETH-USDT hourly backtest configuration spanning several months but reports no performance statistics. It notes that three-candle confirmation may reduce some false breaks while delaying entry, and that the rules can produce false signals in ranging markets. A fixed target may also exit too early during strong trends. Trend filters, volume confirmation, volatility-aware targets, trailing stops, or partial exits are suggested as possible extensions, not tested findings.

Key ideas

• A 20-period average and two standard deviations define the Bollinger Bands.
• Three closes beyond one band trigger an entry in that direction at the third close.
• The stop uses the extreme of the first candle, and the target distance matches the stop distance.
• The ETH hourly backtest settings are provided without performance results.
• Confirmation delay, ranging markets, and a fixed target may limit the approach.

Tags

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