bollinger-bands

Bollinger Bands Trading Strategies in Pine Script

Bollinger Bands are a popular technical indicator used by traders to gauge volatility and identify potential trading opportunities.

In this article, we will explore various Bollinger Bands trading strategies using Pine Script version 6. We will cover both beginner-friendly and advanced techniques to help you improve your trading skills.

What are Bollinger Bands?

Bollinger Bands were created by John Bollinger in the 1980s as an extension of the moving average concept. The bands consist of a moving average (usually a 20-period simple moving average) and two standard deviations plotted above and below it.

The idea behind Bollinger Bands is that they help identify volatility and potential breakouts. When the price touches or breaks through the upper band, it may be a sign of increased volatility and a potential buying opportunity. Conversely, when the price touches or breaks through the lower band, it may indicate decreased volatility and a potential selling opportunity.

Bollinger Bands Trading Strategies

Strategy 1: Mean Reversion Strategy

This strategy involves buying when the price touches the lower Bollinger Band and selling when it touches the upper Bollinger Band. The idea is that the price will revert to its mean (the moving average) after touching the bands, creating a trading opportunity.

// Mean Reversion Strategy in Pine Script v6
// Input parameters
// length = 20 (moving average period)
// stdDev = 2 (standard deviation)
// source = close (price source)
// maType = sma (simple moving average type)
// bandType = bb (Bollinger Bands type)
// signalLength = 5 (signal period)
// signalType = macd (Moving Average Convergence Divergence type)
// Buy/Sell
// if (close >= lowerBand[1]) Buy
// else if (close <= upperBand[1]) Sell
// endif

This strategy is a basic example of a mean reversion strategy. You can adjust the input parameters to suit your trading style and risk tolerance.

Strategy 2: Breakout Strategy

This strategy involves buying when the price breaks through the upper Bollinger Band and selling when it touches or breaks through the lower Bollinger Band. The idea is that the price will continue to rise after breaking through the upper band, creating a trading opportunity.

// Breakout Strategy in Pine Script v6
// Input parameters
// length = 20 (moving average period)
// stdDev = 2 (standard deviation)
// source = close (price source)
// maType = sma (simple moving average type)
// bandType = bb (Bollinger Bands type)
// signalLength = 5 (signal period)
// signalType = macd (Moving Average Convergence Divergence type)
// Buy/Sell
// if (close > upperBand[1] and close <= high) Buy
// else if (close < lowerBand[1] and close >= low) Sell
// endif

This strategy is a basic example of a breakout strategy. You can adjust the input parameters to suit your trading style and risk tolerance.

Strategy 3: Volume-Triggered Strategy

This strategy involves buying when the volume exceeds a certain threshold above the upper Bollinger Band and selling when it falls below a certain threshold below the lower Bollinger Band. The idea is that increased volume indicates strong demand or supply, creating a trading opportunity.

// Volume-Triggered Strategy in Pine Script v6
// Input parameters
// length = 20 (moving average period)
// stdDev = 2 (standard deviation)
// source = close (price source)
// maType = sma (simple moving average type)
// bandType = bb (Bollinger Bands type)
// signalLength = 5 (signal period)
// signalType = macd (Moving Average Convergence Divergence type)
// volumeThreshold = 1000 (volume threshold)
// Buy/Sell
// if (close > upperBand[1] and volume > volumeThreshold) Buy
// else if (close < lowerBand[1] and volume < volumeThreshold) Sell
// endif

This strategy is a basic example of a volume-triggered strategy. You can adjust the input parameters to suit your trading style and risk tolerance.