The trading idea requires quantifying key concepts: uptrend and mean reversion. There can be a million methods to quantify, and similarly, each method has different impact on the profitability of strategy.
Strategy Premise
The trading idea requires quantifying key concepts: uptrend and mean reversion. There can be a million methods to quantify, and similarly, each method has different impact on the profitability of strategy.
We can use Bollinger Bands to identify mean reversion opportunity. Bollinger Bands are one of the most common technical indicators and use 2 Standard Deviations to contain 95% price movement within the bands. The common parameters are used for Bollinger Band- 15 periods and 2 standard deviations. When price go beyond the bands and retrace back inside the bands, we use it as a confirmation to generate Buy/Sell signals.
Strategy Logic
Buy: when prices are in uptrend and crossing above lower Bollinger Band
Sell: when prices cross below lower Bollinger band or stop loss condition is met
When Strategy gives Buy, it will send LE in Call and LX in Put. When Strategy gives Sell, it will send LE in Put and LX in Call.
Amibroker Settings
Step 1: Make sure you have completed Jump Start setup
Step 2: Download AFL from here. In Amibroker, Go to Formula editor and paste the AFL here.
Step 3: Right Click on the chart and go Parameters to adjust the inputs of the strategy.
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