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Bollinger Bands

Bollinger Bands is one of the most well-known technical analysis indicators, developed by John Bollinger. It helps traders measure volatility and identify potential overbought and oversold levels of an asset.

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How Bollinger Bands Work

Section titled “How Bollinger Bands Work”

Bollinger Bands consist of three lines:

  1. Middle Band — Simple Moving Average (SMA) for the selected period.
  2. Upper Band — SMA + k standard deviations (usually k = 2).
  3. Lower Band — SMA − k standard deviations.

How it works:

When the bands widen, the indicator shows increasing volatility, and when they narrow, it shows a decrease in market activity.

The Veles bot implementation uses a standard deviation of 2 and the ability to work on different timeframes, from 1 minute and higher. A “Reverse Signal” option is also available, for switching the entry and exit logic.

Bollinger Band Trading Signals

Section titled “Bollinger Band Trading Signals”
  • Candles closing below the lower band is a Buy-signal (open Long or close Short).

Buy signals

  • Candles closing above the upper band is a Sell-signal (open Short or close Long).

Sell signals

This approach can be used for both trend trading (for a breakout) and counter-trend trading (for a rebound from the channel boundaries).

Advantages

Section titled “Advantages”
  • Shows the current market status: trend or flat.
  • Helps find entry and exit points with high accuracy.
  • Universal – works in all markets (cryptocurrencies, stocks, forex).
  • Can be combined with other indicators to filter signals.

Limitations

Section titled “Limitations”
  • In a strong trend, the price may remain outside the bands for a long time, giving false signals for a rebound.
  • It is recommended to adjust the period and standard deviation multiplier for each instrument.
  • Works best when combined with volume or trend filters.

Using in Veles Bots

Section titled “Using in Veles Bots”

When trading with Bollinger Bands in the bot, you can set the following:

  • Calculation timeframe (1 minute or higher).
  • Trading direction (breakout or rebound).
  • “Reverse signal” option to change the entry logic.
  • Minimum PnL check to prevent closing deals at a loss.

Summary

Section titled “Summary”

Bollinger Bands is a time-tested tool that helps traders find strong entry and exit points.
When properly configured and combined with filters, they can form the basis of both scalping and medium-term strategies.

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