📘 Summary
Indicators | Bollinger Bands
Stochastic Oscillator (14, 3, 3) |
Suggested Chart Timeframes | 15M, 1H, 1D |
Long Entry | - Price touches or dips below the lower Bollinger Band
- Stochastic Oscillator value falls below 20 |
Short Entry | - Price touches or rises above the upper Bollinger Band
- Stochastic Oscillator value exceeds 80 |
Suggested Exit Signal | - Fixed Stop-Loss/Take-Profit levels (e.g., 1% and 3%). |
📚 Details
The Stochastic Bollinger Strategy use two common indicators (Stochastic Oscillator and Bollinger Bands). The strategy use straight-forward entry signals. However, due to the nature of the Bollinger Bands, beginners might consider it slightly complex to identify the signals (compared to other strategies).
Required Indicators
To start this strategy, you will need two key indicators:
- Bollinger Bands serve as a volatility gauge and consist of a simple moving average (middle band) flanked by two standard deviation lines (upper and lower bands). These bands adjust their width in response to market volatility, helping to identify potential overbought and oversold conditions.
- The Stochastic Oscillator is a momentum indicator that compares a security's closing price to its price range over a specified period. It generates values between 0 and 100, with key thresholds at 20 and 80. This oscillator helps identify oversold conditions (below 20) and overbought conditions (above 80).
Chart Timeframes
This strategy is versatile across several chart timeframes, including 15M, 1H, 4H, and daily charts. However, backtests have shown that hourly and daily charts yield the best results.
Entry Signals
Let’s have a look at the entry signals. The strategy provides a clearly defined entry signal for both long and short trades. However, it is important to make sure that all criteria are met before opening a trade!
Long Entry Signal
Short Entry Signal
Obviously, the short entry is the opposite in terms of indicators.
Exit Signal
When it comes to the exit signals, you can have more flexible approaches. However, make sure to define your exit strategy before you enter the trade.
Here are two options:
- Set fixed Stop-Loss/Take-Profit levels (e.g., 1% and 3%). You can backtest the best levels before executing your trade (Crypto OS offers a straightforward feature to backtest your strategies).
- Alternatively, you can use the Bollinger Bands as exit signal and close the trade once the price ranges in the middle of the bands.
Backtest Results
After testing more than 200 crypto tokens, we have experienced a wide range of success rates. Therefore, it is essential to thoroughly test the strategy with your parameters and desired tokens.
How To Apply The Strategy?
All indicators required for this strategy are available on TradingView, making it accessible for traders at all levels.
For those looking for a more direct approach, Crypto OS offers this strategy as a pre-defined signal for more than 200 crypto tokens, simplifying the process even further.