RSI Bollinger Bands Trading Strategy

Pine ScriptMean reversion Volatility RSI MACD SMA Bollinger Bands

Author: ChaoZhang
Complexity: Intermediate · 66 lines
Parameters: 12
Backtest bar: 1h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

This strategy mainly uses the Relative Strength Index (RSI) combined with Bollinger Bands for trading signal judgment. Specifically, it goes long when the RSI crosses above the oversold level and below the lower Bollinger Band, and goes short when the RSI crosses below the overbought level and above the upper Bollinger Band.

Strategy Logic

The strategy first calculates the RSI indicator and Bollinger Bands. The RSI indicator reflects the relative strength of the trading instrument. When the RSI is below the oversold zone (default 30), it means the instrument is oversold and should buy. Bollinger Bands include upper band, middle band and lower band, which reflects well the fluctuation range of prices. Buying near the lower band and selling near the upper band can provide relatively reliable signals. This strategy combines the RSI indicator and Bollinger Bands for trading signal judgment. It generates buy signal when the RSI rises from the oversold zone to above it (default 30), and price rises from below the lower band to above it; it generates sell signal when the RSI falls from the overbought zone to below it (default 70), and price falls from above the upper band to below it.

Advantages

Combining RSI and Bollinger Bands improves signal accuracy
RSI filters out some noise
Bollinger Bands reflect current market volatility range, reliable signals
Strict trading rules, avoids invalid trades

Risks

Improper Bollinger Bands parameters may cause inaccurate signals
Inappropriate RSI overbought/oversold zone setup may impact judgements
Strategy is strict, may miss some opportunities

Solutions:

Optimize Bollinger Bands and RSI parameters to find best combination
Relax conditions moderately, allow some invalid trades for more chances

Optimization Directions

Test and optimize RSI and Bollinger parameters for optimum
Add stop loss to control risks
Consider adding other indicators like MACD for signal verification
Test optimization results across different products and timeframes

Summary

The overall strategy is robust, effectively combines RSI and Bollinger Bands for stop loss. Further improvement can be achieved by testing and optimizing parameters. Also need to be aware of potential signal missing risks due to strict rules. In general, this is a reliable quantitative trading strategy.

Parameters

Name	Default	What it controls
v_input_1	2019	Start Year
v_input_2	4	Start Month
v_input_3	true	Start Day
v_input_4	false	Start Hour
v_input_5	false	Start Minute
v_input_6	9	RSI Period Length
v_input_7	30	RSIL
v_input_8	69	RSIh
v_input_9	60	Bollinger Period Length
v_input_10	2	Bb
v_input_11	true	Enable Bar Color?
v_input_12	true	Enable Background Color?

Source Pine Script

/*backtest
start: 2023-12-01 00:00:00
end: 2023-12-31 23:59:59
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//@version=2
strategy("BB + RSI 20MIN,", shorttitle="BBRSI 20MIN", overlay=true )
     
     // Strategy Tester Start Time
sYear = input(2019, title = "Start Year")
sMonth = input(04, title = "Start Month", minval = 01, maxval = 12)
sDay = input(01, title = "Start Day", minval = 01, maxval = 31)
sHour = input(00, title = "Start Hour", minval = 00, maxval = 23)
sMinute = input(00, title = "Start Minute", minval = 00, maxval = 59)
startTime = true


///////////// RSI
RSIlength = input(9,title="RSI Period Length") 
RSIoverSold = input(30, minval=1,title="RSIL")
RSIoverBought = input(69, minval=1,title="RSIh")
price = open
vrsi = rsi(price, RSIlength)


///////////// Bollinger Bands
BBlength = input(60, minval=1,title="Bollinger Period Length")
BBmult = input(2.0, minval=0.001, maxval=50,title="Bb")
BBbasis = sma(price, BBlength)
BBdev = BBmult * stdev(price, BBlength)
BBupper = BBbasis + BBdev
BBlower = BBbasis - BBdev
source = close
buyEntry = crossover(source, BBlower)
sellEntry = crossunder(source, BBupper)
plot(BBbasis, color=aqua,title="Bollinger Bands SMA Basis Line")
p1 = plot(BBupper, color=silver,title="Bollinger Bands Upper Line")
p2 = plot(BBlower, color=silver,title="Bollinger Bands Lower Line")
fill(p1, p2)


///////////// Colors
switch1=input(true, title="Enable Bar Color?")
switch2=input(true, title="Enable Background Color?")
TrendColor = RSIoverBought and (price[1] > BBupper and price < BBupper) and BBbasis < BBbasis[1] ? red : RSIoverSold and (price[1] < BBlower and price > BBlower) and BBbasis > BBbasis[1] ? green : na
barcolor(switch1?TrendColor:na)
bgcolor(switch2?TrendColor:na,transp=50)


///////////// RSI + Bollinger Bands Strategy
if (not na(vrsi))

    if (crossover(vrsi, RSIoverSold) and crossover(source, BBlower))
        strategy.entry("RSI_BB_L", strategy.long and startTime, stop=BBlower,  comment="RSI_BB_L")
    else
        strategy.cancel(id="RSI_BB_L")
        
    if (crossunder(vrsi, RSIoverBought) and crossunder(source, BBupper))
        strategy.entry("RSI_BB_S", strategy.short and startTime, stop=BBupper,comment="RSI_BB_S")
    else
        strategy.cancel(id="RSI_BB_S")

//plot(strategy.equity, title="equity", color=red, linewidth=2, style=areabr)

Published by ChaoZhang on the FMZ strategy square · last modified 2024-01-24. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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