This strategy combines Bollinger Bands and Relative Strength Index (RSI) to identify opportunities when Bollinger Bands are squeezing and RSI is rising, with trailing stop loss to control risks.
The core logic of this strategy is to identify Bollinger Bands squeeze and predict price breakout when RSI is in uptrend. Specifically, when 20-period BB middle band standard deviation is less than ATR*2, we determine BB squeeze happening; meanwhile, if both 10 and 14 period RSI are rising, we predict prices may break above BB upper band soon and go long.
After entering the market, we use ATR safety distance + adaptive stop loss to lock profit and manage risks. Positions will be closed when price hits stop loss or RSI becomes overbought (14-period RSI above 70 and 10-period RSI exceeds 14).
The biggest advantage of this strategy is to identify consolidation period with BB squeeze and predict breakout direction with RSI. Also, using adaptive stop loss based on market volatility rather than fixed stop loss can better lock profit while controlling risk.
The major risk of this strategy is misidentification of BB squeeze and RSI uptrend, which may lead to false breakout. Besides, adaptive stop loss may fail to close positions timely during high volatility. Improving stop loss methods like curve stop loss can mitigate this risk.
This strategy can be further optimized in the following aspects:
Improve BB parameters to identify squeeze more accurately
Test different values for RSI periods
Examine other stop loss techniques like curve SL or back-looking SL
Adjust parameters based on symbol characteristics
This strategy leverages the complementarity of BB and RSI to achieve good risk-adjusted returns. Further optimizations on aspects like stop loss and parameter tuning can make it fit better for different trading instruments.
/*backtest start: 2023-12-01 00:00:00 end: 2023-12-31 23:59:59 period: 1h basePeriod: 15m exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}] */ // This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/ // © DojiEmoji // //@version=4 strategy("[KL] BOLL + RSI Strategy",overlay=true,pyramiding=1) // Timeframe { backtest_timeframe_start = input(defval = timestamp("01 Apr 2016 13:30 +0000"), title = "Backtest Start Time", type = input.time) USE_ENDTIME = input(false,title="Define backtest end-time (If false, will test up to most recent candle)") backtest_timeframe_end = input(defval = timestamp("01 May 2021 19:30 +0000"), title = "Backtest End Time (if checked above)", type = input.time) within_timeframe = true // } // Bollinger bands (sdv=2, len=20) { BOLL_length = 20, BOLL_src = close, SMA20 = sma(BOLL_src, BOLL_length), BOLL_sDEV_x2 = 2 * stdev(BOLL_src, BOLL_length) BOLL_upper = SMA20 + BOLL_sDEV_x2, BOLL_lower = SMA20 - BOLL_sDEV_x2 plot(SMA20, "Basis", color=#872323, offset = 0) BOLL_p1 = plot(BOLL_upper, "BOLL Upper", color=color.navy, offset = 0, transp=50) BOLL_p2 = plot(BOLL_lower, "BOLL Lower", color=color.navy, offset = 0, transp=50) fill(BOLL_p1, BOLL_p2, title = "Background", color=#198787, transp=85) // } // Volatility Indicators { ATR_x2 = atr(BOLL_length) * 2 // multiplier aligns with BOLL avg_atr = sma(ATR_x2, input(1,title="No. of candles to lookback when determining ATR is decreasing")) plot(SMA20+ATR_x2, "SMA20 + ATR_x2", color=color.gray, offset = 0, transp=50) plot(SMA20-ATR_x2, "SMA20 - ATR_x2", color=color.gray, offset = 0, transp=50) plotchar(ATR_x2, "ATR_x2", "", location = location.bottom) //} // Trailing stop loss { TSL_source = low var entry_price = float(0), var stop_loss_price = float(0) trail_profit_line_color = color.green if strategy.position_size == 0 or not within_timeframe trail_profit_line_color := color.black stop_loss_price := TSL_source - ATR_x2 else if strategy.position_size > 0 stop_loss_price := max(stop_loss_price, TSL_source - ATR_x2) plot(stop_loss_price, color=trail_profit_line_color) if strategy.position_size > 0 and stop_loss_price > stop_loss_price[1] alert("Stop loss limit raised", alert.freq_once_per_bar) // } end of Trailing stop loss //Buy setup - Long positions { is_squeezing = ATR_x2 > BOLL_sDEV_x2 if is_squeezing and within_timeframe and not is_squeezing[1] alert("BOLL bands are squeezing", alert.freq_once_per_bar) else if not is_squeezing and within_timeframe and is_squeezing[1] alert("BOLL bands stopped squeezing", alert.freq_once_per_bar) ema_trend = ema(close, 20) concat(a, b) => concat = a if a != "" concat := concat + ", " concat := concat + b concat // } // Sell setup - Long position { rsi_10 = rsi(close, 10), rsi_14 = rsi(close, 14) overbought = rsi_14 > input(70,title="[Exit] RSI(14) value considered as overbought") and rsi_10 > rsi_14 // } end of Sell setup - Long position // MAIN: { if within_timeframe entry_msg = "" exit_msg = "" // ENTRY { conf_count = 0 volat_decr = avg_atr <= avg_atr[1] rsi_upslope = rsi_10 > rsi_10[1] and rsi_14 > rsi_14[1] if volat_decr and rsi_upslope and is_squeezing and strategy.position_size == 0 strategy.entry("Long",strategy.long, comment=entry_msg) entry_price := close stop_loss_price := TSL_source - ATR_x2 // } // EXIT { if strategy.position_size > 0 bExit = false if close <= entry_price and TSL_source <= stop_loss_price exit_msg := concat(exit_msg, "stop loss [TSL]") bExit := true else if close > entry_price and TSL_source <= stop_loss_price exit_msg := concat(exit_msg, "take profit [TSL]") bExit := true else if overbought exit_msg := concat(exit_msg, "overbought") bExit := true strategy.close("Long", when=bExit, comment=exit_msg) // } // } // CLEAN UP: if strategy.position_size == 0 and not is_squeezing entry_price := 0 stop_loss_price := float(0)template: strategy.tpl:40:21: executing "strategy.tpl" at <.api.GetStrategyListByName>: wrong number of args for GetStrategyListByName: want 7 got 6