TradeStation Strategy - Bollinger Bands Reversal Price Exit Setup
In this EasyLanguage tutorial, we explore a TradeStation Strategy that uses price exits from Bollinger Bands.
Obviously, this type of strategy will work better in mean-reverting markets.
It will, therefore, be necessary to look for mature and very liquid markets that generally respond well to these logics as S&P500.
The entry rules are straightforward.
When the closure of the previous bar is lower than the lower band is purchased, when the price of the previous bar is higher than the upper band is purchased.
We have also included a small filter to avoid opening operations against trends.
The middle line of the Bollinger Bands is compared to another slower moving average to establish the direction of the trend.
To buy the fast-moving average must be above the moving average five times slower and vice versa to sell.
Exit management is more complicated.
Firstly, the classic exit occurs when the price exceeds the median line.
Secondly, we have a stoploss equal to X times the ATR compared to the entry price.
Finally, we have an exit after X candles if the position is losing money.
We like this kind of stop loss because we would like go quickly into profit; otherwise, it is worth closing.
TradeStation Strategy Back Test
This trading strategy applied to Spy timeframe daily generates a good number of operations and has an excellent average trade of over $ 45.
We are delighted because this strategy has also managed to earn short.
In the stock market, it is complicated to find bidirectional trading strategies.
It can certainly be improved, but a Trading System with a profit factor of 1.81 is very encouraging.
No money management was applied, and no backtests were made regarding other types of take-profit.
Read more about our Bollinger Bands Indicator in this article.