Bollinger Bands Trading Test

In this article I will discuss about Bollinger bands indicator trading strategy. And I will shared to you completely about my Bollinger bands trading test. We can use Bollinger bands indicator in many different trading strategies. I like Bollinger bands indicator because the simplicity and it has pretty good accuracy. Based on this I tried to make some back test the Bollinger bands indicator to find the best setting and the best system for Bollinger bands indicator. There are so many trading system based on Bollinger bands indicator, but I only take two for my strategy test.

And here are some of them.

Bollinger bands indicator strategy #1

This is the classic trading system which using Bollinger bands as support and resistance levels. Yes, we trade with support and resistance in Bollinger bands and we trade based on bouncing on the support and resistance lines. The main trading rules are :

Open short trading position if the market price is touching the upper bands and candlestick close below the band, open position at the opening of the next candlestick. And you can close your trading position if the market price is closed above the moving average.

Open long trading position if the market price is touching the lower bands and candlestick close above the band, open position at the opening of the next candlestick. And you can close your trading position if the market price is closed below the moving average.

All back tests are made in demo account using EURUSD and using default setting of Bollinger bands indicator (20.2.0).

And below is the trading result.



TF P/L ($)
D1 -210
H4 -837
H1 -574
M15 -4113
Trading Bollinger bands using optimization strategy

Daily time frame


H4 time frame


H1 time frame


M15 time frame

Bollinger bands indicator strategy #2

The 2nd method is the popular trading system using Bollinger bands indicator. I read this trading strategy in the book “How to make big profits in the world of Forex ?” by Kathy Lien. By the way I always recommend all books written by Kathy Lien. This trading system is explains about how to trade breakout using Bollinger bands indicator and how to read the volatility in the forex market using this indicator. Let’s discuss about this Bollinger bands indicator trading strategy.

The trading rules are :

Open short trading position if the market price touches the lower band and closes below the band, open short trading position at the opening of the next candlestick. And you can close your trading position if the market price closes above the moving average line.

Open long trading position if the market price touches the upper band and close above the band, open long trading position at the opening of the next candlestick. And you can close your trading position if the market price closes below the moving average indicator line.

Daily time frame

TF P/L ($)
D1 2687
H4 270
H1 105
M15 -8892

Trading Bollinger bands using optimization strategy


Daily time frame

H4 time frame


H1 time frame



M15 time frame
Summary

The main purpose of this first trading back test is to analyze these two trading strategy based on Bollinger bands indicator. And optimization in the second system gives the better results. In this case we can say that the Bollinger breakout trading strategy is better than the reversal trading. Because breakout trading strategy is more like we trade with follow the market trend not against it.