VBandsAlgo

VOLATILITY BANDS STRATEGY

Quick Facts:

• Category: Mean Reversion / Volatility
• Markets: All markets
• Timeframes: 5min, 15min, 1H, 4H

Overview

The VBands Algorithm trades price interactions with dynamic volatility bands (Bollinger-style). The system identifies statistically significant price extremes and trades the reversion to mean while respecting the current volatility regime.

The algorithm offers multiple entry modes: band touches, band penetrations, and band walk reversals, each suited to different market conditions.

How It Works

BAND CALCULATION Standard Bollinger Band mathematics:

• Basis: SMA(close, bandPeriod)
  • Standard Deviation: StdDev(close, bandPeriod)
  • Upper Band: Basis + (StdDev × bandMult)
  • Lower Band: Basis - (StdDev × bandMult)
  • Band Width: (Upper - Lower) / Basis × 100 (squeeze indicator)

ENTRY MODES

BAND TOUCH:

• Long: Low touches or crosses lower band
  • Short: High touches or crosses upper band

BAND PENETRATION (with reversal):

• Long: Close crosses below lower band, then closes above
  • Short: Close crosses above upper band, then closes below

BAND WALK REVERSAL:

• Detect extended band walking (multiple touches)
  • Enter on first candle that closes inside bands

SQUEEZE DETECTION Identifies low-volatility compression:

• squeezeThreshold: Minimum band width %
  • When band width < threshold, market is in squeeze
  • Optional: Only trade during/after squeeze release

TREND FILTER Bias direction based on basis line slope:

• Bullish Bias: Basis > Basis[n]
  • Bearish Bias: Basis < Basis[n]
  • Neutral: Flat basis (range bound)

Key Parameters

BAND SETTINGS:

• bandPeriod (20): SMA period for basis
  • bandMult (2.0): Standard deviation multiplier
  • entryMode ("Touch"): "Touch", "Penetration", "WalkReversal"

SQUEEZE:

• detectSqueeze (true): Enable squeeze detection
  • squeezeThreshold (4.0): Minimum band width % for squeeze

TREND FILTER:

• useTrendFilter (true): Align with basis slope
  • trendLookback (5): Bars to compare for trend

Best Use Cases

✅ MEAN REVERSION at statistical extremes ✅ SQUEEZE BREAKOUTS after compression ✅ RANGE TRADING between band boundaries ✅ VOLATILITY REGIME identification