Bollinger Bands are an indicator for technical market analysis, developed by John Bollinger in the 1980s. The main goal of the indicator is to alert traders of a potential price change or stability trend. This helps determine whether prices are relatively high or low at any given time.
This example image can help you better understand how the bands work:
- The blue line labeled “20 Period MA” is a moving arithmetical average. This means that the price is determined from the average of the past 20 prices, which is the Simple Moving Average (SMA). You can also indicate Exponential Moving Average (EMA) and Weighted Moving Average (WMA) instead of Simple Moving Average (SMA) in the bot settings.
Detailed information on the formulas can be seen here.
- The upper red band is the SMA plus two standard deviations.
- The lower red band is the SMA minus two standard deviations.
The upper and lower red bands expand during periods of volatility and contract during price stability. The idea is that you can see these stability periods in contrast to when the price goes over or under one of the bands, indicating to the trader a breakthrough event.
If the price goes under the lower band, it means that price is dropping and it is a good time to buy. If the price goes over the upper band, then the price is rising and it is better to sell.
Step 1: Bot Name
Give your Bot a unique name.
Step 2: Exchange Account
Choose the exchange where you want the bot to trade.
You will see only exchanges that you have linked with our system.
See instructions for connecting to external exchanges.
Step 3: Trading Pair
Determine the pair the bot will trade with; the first one is the asset to acquire the second will be the quote currency.
Step 4: Investment Amount
The maximum amount of quote currency available to the bot for trading. When backtesting, this value can be any amount. However, in live trading mode, the bot will stop trading if there are insufficient funds available in the quote currency wallet.
Step 1: Choose Chart Interval
Select the chart time frame to run this bot on. Strategy calculations and buy/sell decisions are made at the closing price of each bar. Lower time frames result in more trades than higher, and vice versa.
Step 2: Moving Average Period
Specify the look-back period (number of bars) for moving average and standard deviation calculation.
Step 3: Moving Average Type
Specify the type of moving average to use.
Step 4: Upper Band Standard Deviation Multiplier
Specify the standard deviation multiplier for the upper band.
Step 5: Lower Band Standard Deviation Multiplier
Specify the standard deviation multiplier for the lower band.
Profit & Loss Settings
Step 1: Take Profit Signal
Enter the profit % you want to gain that tells the bot to sell the accumulated assets.
Step 2: Stop Loss Signal
Enter the loss % that tells the bot to close (sell) the open position and avoid further losses.
Click the Optimize Parameters link to have the bot determine the best parameters based on the pair you want to trade. You can also set other parameters manually, and it will optimize only the locked fields.
Running Your Bot
Once you have configured the bot, click Save Bot. If there are any errors, correct them and save the bot again.
When your bot is ready, click Start Bot.
You can monitor your bot's status from the Dashboard. If at any time you want to adjust the bot's configuration, stop the bot first, then click the Edit button.