The Dual Rail Trend Tracking Strategy is a short-term trading strategy based on Bollinger Bands. This strategy uses the upper and lower rails of the Bollinger Bands as buy and sell signals to implement short-term trading.
The main components of this strategy are:
Calculate the middle, upper and lower rails of the Bollinger Bands. The middle rail is the n-day simple moving average of the closing price, and the width of the Bollinger Bands is determined by twice the n-day standard deviation of the closing price.
Go long when the closing price crosses above the lower rail from below, and close the position when the closing price crosses below the upper rail from above.
The default n value is 20 days, which can be adjusted based on market conditions. The width of the bands is controlled by the standard deviation multiplier, default to 2x.
This strategy is simple and straightforward to implement. It can effectively track market trends and profit from the volatility.
The Dual Rail strategy has the following advantages:
Easy to implement with simple and intuitive logic.
Can timely track market changes and capture short-term trading opportunities.
Utilizes the statistical properties of Bollinger Bands, which provides mathematical justification.
Prevents premature entry and delayed exit.
The parameters can be adjusted to adapt to different market conditions.
No need to predict market trends, just follow the market.
There are also some risks with this strategy:
Bollinger Bands cannot accurately predict trend reversal points.
There may be more false signals.
It cannot effectively filter out the noise in range-bound markets.
Reasonable Bollinger Bands parameters are needed, otherwise it may affect strategy performance.
Should avoid using this strategy during market consolidations.
There is some lag, tracking error should be monitored.
Risks can be reduced by adjusting parameters, combining with other indicators, etc.
This strategy can be optimized in the following aspects:
Combine with other indicators like MACD, KDJ to filter false signals.
Dynamically adjust Bollinger Bands parameters based on changing market conditions.
Set stop loss and take profit to properly control single trade risks.
Optimize entry and exit points, e.g. wait for complete penetration of bands.
Parameter optimization on moving average length, standard deviation multiplier, etc.
Distinguish bull versus bear market for directional trading.
The Dual Rail strategy is a simple and practical short-term trading strategy. It utilizes the statistical properties of Bollinger Bands to effectively capture short-term trends. The strategy is easy to implement with simple logic, but also has some flaws. Further optimizations can improve its performance in live trading. Overall, the Dual Rail strategy suits investors looking for short-term trading opportunities.
/*backtest
start: 2023-08-18 00:00:00
end: 2023-09-17 00:00:00
period: 3h
basePeriod: 15m
exchanges: [{"eid":"Binance","currency":"BTC_USDT"}]
*/
//@version=5
strategy("Bollinger Bands Strategy", overlay=true)
length = input.int(20, minval=1)
src = input(close, title="Source")
mult = input.float(2.0, minval=0.001, maxval=50, title="StdDev")
basis = ta.sma(src, length)
dev = mult * ta.stdev(src, length)
upper = basis + dev
lower = basis - dev
offset = input.int(0, "Offset", minval = -500, maxval = 500)
plot(basis, "Basis", color=#FF6D00, offset = offset)
p1 = plot(upper, "Upper", color=#2962FF, offset = offset)
p2 = plot(lower, "Lower", color=#2962FF, offset = offset)
fill(p1, p2, title = "Background", color=color.rgb(33, 150, 243, 95))
// Buy condition: Price crosses below the lower Bollinger Band
buy_condition = ta.crossover(src, lower)
strategy.entry("Buy", strategy.long, when=buy_condition)
// Sell condition: Price crosses above the upper Bollinger Band
sell_condition = ta.crossunder(src, upper)
strategy.close("Buy", when=sell_condition)