Bollinger bands strategy

Checked October 2026

Bollinger bands are a moving average with a band above and below it. Method III buys after a tag of the lower band while buying pressure is still positive, and sells the mirror at the upper band. Backtoast ran it on futures. This version failed our test, losing 2.3% a year over 19 trades.

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Bollinger bands strategy

The bands are the 20-day average plus and minus two standard deviations of the closes, so they widen when the market gets volatile. A buy alert is a day whose low touches the lower band while Intraday Intensity is positive. That's a running sum of where each day closes in its range, weighted by volume. The buy comes only if the next day closes above the alert day's high, and a sell alert closes the long and goes short.

Bollinger doesn't give the sum's length, the confirming day or the exit, so the 21-day sum, the close above the alert day's high and the reverse on a sell alert are the run's choices.

Connors RSI(2) also buys a short dip, using a two-day RSI instead of a band.

When it works

Band reversals are mean reversion, so they make their money in range-bound markets, where price tends to return to the 20-day average after tagging a band, and lose in a strong trend, when price walks along one band for weeks. Traders keep using the bands because they widen and narrow with volatility, so the same rule fits a quiet market and a fast one. Taking only the tags that go with the longer trend is the usual fix, and a draft can test that before you spend a full test.

Origins

John Bollinger set out Method III in Bollinger on Bollinger Bands in 2001. His own rules warn that "tags of the bands are just that, tags not signals," which is why the method waits for volume and a confirming day. The run traded the E-mini S&P 500, crude oil, gold and 10-year notes from late 2021 to October 2026.

The run is Backtoast's, from 29 October 2026, after costs.