[KL] Bollinger Bands Consolidation Strategy

2021年4月20日

This strategy will enter into long position based on the volatility of prices implied by indicators of (a) Bollinger bands, and (b) ATR.

Application of Bollinger bands ("BOLL")
Using plain vanilla settings for BOLL (i.e. 20 period moving average, and 2 standard deviations of closing prices), we are interested to know about the shape of the area that is bounded by the upper and lower bands.

In theory, consolidation happens when volatility of price decreases. Visually speaking, this is represented by the narrowing of the upper/lower bands. This strategy considers the narrowing of BOLL bands as the primary indicator for long-entry.

Application of ATRs (as confirmations)
Firstly, to confirm that BOLL bands are narrowing (as mentioned above), the ATR at a potential point of entry is compared against the standard deviation of prices over BOLL's lookback periods. Once again, visualizing the shape of BOLL bands during consolidation, we assume the lines begin to squeeze when the distance between the center line and upper/lower band is less than two current ATRs.

Secondly, this strategy looks into the moving average of ATRs to assure that prices are not too choppy when entering into market. If the moving average of ATR decreases at a point in time such that all the above conditions are met, then we can assert that the volatility of price is decreasing.

Thirdly, ATR is used for determining the size of our trailing stop loss. We will keep the multiplier fixed at two.

2021年4月22日

版本注释

Added a dropdown menu in Settings allowing user to select between different buy setups.

2021年4月25日

版本注释

- Added lines plotting ATR relative to center line of Bollinger bands
- Added additional buy confirmation signals (i.e. MACD) for entry during consolidation
- Added exit signals, selectable in settings (i.e. risk-reward ratio, and bearish price action signals)

2021年4月25日

版本注释

Added option to ignore exit signals during consolidation (unless hitting stop loss)

2021年4月28日

版本注释

What's new in the latest update:
- added alerts
- additional buy and exit setups

2021年4月29日

版本注释

Reduced the frequency of alerts

2021年4月29日

版本注释

Combined entry and exit confirmations, script will now apply setups in combinations, no longer need to select them individually in settings.

2021年5月1日

版本注释

- Simplified entry setup by reducing the number of confirmations to looks for (i.e. no need to refer to MACD when there is not much price momentum during squeeze)
- For exit signal with respect to bearish candlesticks, script will now consider the length of red-bar vs ATR