OPEN-SOURCE SCRIPT
Bollinger Bands Reversal + IBS Strategy
█ STRATEGY DESCRIPTION
The "Bollinger Bands Reversal Strategy" is a mean-reversion strategy designed to identify potential buying opportunities when the price deviates below the lower Bollinger Band and the Internal Bar Strength (IBS) indicates oversold conditions. It enters a long position when specific conditions are met and exits when the IBS indicates overbought conditions. This strategy is suitable for use on various timeframes.
█ WHAT ARE BOLLINGER BANDS?
Bollinger Bands consist of three lines:
- **Basis**: A Simple Moving Average (SMA) of the price over a specified period.
- **Upper Band**: The basis plus a multiple of the standard deviation of the price.
- **Lower Band**: The basis minus a multiple of the standard deviation of the price.
Bollinger Bands help identify periods of high volatility and potential reversal points.
█ WHAT IS INTERNAL BAR STRENGTH (IBS)?
Internal Bar Strength (IBS) is a measure of where the closing price is relative to the high and low of the bar. It is calculated as:
A low IBS value (e.g., below 0.2) indicates that the close is near the low of the bar, suggesting oversold conditions. A high IBS value (e.g., above 0.8) indicates that the close is near the high of the bar, suggesting overbought conditions.
█ SIGNAL GENERATION
1. LONG ENTRY
A Buy Signal is triggered when:
2. EXIT CONDITION
█ ADDITIONAL SETTINGS
█ PERFORMANCE OVERVIEW
The "Bollinger Bands Reversal Strategy" is a mean-reversion strategy designed to identify potential buying opportunities when the price deviates below the lower Bollinger Band and the Internal Bar Strength (IBS) indicates oversold conditions. It enters a long position when specific conditions are met and exits when the IBS indicates overbought conditions. This strategy is suitable for use on various timeframes.
█ WHAT ARE BOLLINGER BANDS?
Bollinger Bands consist of three lines:
- **Basis**: A Simple Moving Average (SMA) of the price over a specified period.
- **Upper Band**: The basis plus a multiple of the standard deviation of the price.
- **Lower Band**: The basis minus a multiple of the standard deviation of the price.
Bollinger Bands help identify periods of high volatility and potential reversal points.
█ WHAT IS INTERNAL BAR STRENGTH (IBS)?
Internal Bar Strength (IBS) is a measure of where the closing price is relative to the high and low of the bar. It is calculated as:
A low IBS value (e.g., below 0.2) indicates that the close is near the low of the bar, suggesting oversold conditions. A high IBS value (e.g., above 0.8) indicates that the close is near the high of the bar, suggesting overbought conditions.
█ SIGNAL GENERATION
1. LONG ENTRY
A Buy Signal is triggered when:
- The IBS value is below 0.2, indicating oversold conditions.
- The close price is below the lower Bollinger Band.
- The signal occurs within the specified time window (between `Start Time` and `End Time`).
2. EXIT CONDITION
- A Sell Signal is generated when the IBS value exceeds 0.8, indicating overbought conditions. This prompts the strategy to exit the position.
█ ADDITIONAL SETTINGS
- Length: The lookback period for calculating the Bollinger Bands. Default is 20.
- Multiplier: The number of standard deviations used to calculate the upper and lower Bollinger Bands. Default is 2.0.
- Start Time and End Time: The time window during which the strategy is allowed to execute trades.
█ PERFORMANCE OVERVIEW
- This strategy is designed for mean-reverting markets and performs best when the price frequently deviates from the Bollinger Bands.
- It is sensitive to oversold and overbought conditions, as indicated by the IBS, which helps to identify potential reversals.
- Backtesting results should be analyzed to optimize the Length and Multiplier parameters for specific instruments.
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