Bollinger Bands Strategy - Cohen

The Bollinger Bands Strategy - Cohen indicator is a technical analysis tool that identifies potential mean-reversion opportunities by highlighting candles that close outside the bands and subsequently return within them.

Usage

The indicator is used to identify reversal points when the price extends beyond the standard volatility ranges defined by the Bollinger Bands.

• Buy Signal: A green candle appears when the price has closed below the lower band and the subsequent candle closes back inside the band. This suggests a potential move toward the basis (median) or the upper band.
• Sell Signal: A red candle appears when the price has closed above the upper band and the subsequent candle closes back inside the band. This suggests a potential move toward the basis or the lower band.

Users can use the included 200-period Moving Average (MA1) to determine the long-term trend direction, potentially filtering signals to only trade in the direction of the primary trend.

Details

This tool is based on the "Prince of NY" strategy. It utilizes a standard Bollinger Band construction consisting of a simple moving average (basis) and two standard deviation bands. The core logic relies on the "close out, close in" principle, which assumes that price extremes outside the bands are often unsustainable and likely to revert to the mean.

The script provides visual bar coloring to make entry points immediately recognizable on the chart. Additionally, it includes a long-term moving average to provide broader market context.

Settings

• MA1 Period: Sets the length of the long-term Simple Moving Average (default is 200).
• BB Length: Determines the number of bars used to calculate the Bollinger Bands basis and standard deviation.
• Close Price: Allows the user to select the source data for the Bollinger Band calculation.
• BB Multiplier: Adjusts the width of the bands by setting the number of standard deviations from the basis.

FAQ

How do I use the Bollinger Bands Strategy - Cohen?

You can look for color-coded candles that indicate a return to the Bollinger Band range after a breakout. Green bars indicate bullish mean-reversion, while red bars indicate bearish mean-reversion.

What is the purpose of the red line?

The red line represents the MA1 (200-period Moving Average), which is commonly used to identify the overall trend of the asset.

How can I access this tool?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.