Bollinger Divergence

Bollinger Divergence hunts for extremes where price pierces a band yet the opposite band begins to contract. This divergence between price momentum and volatility often precedes a snap back toward the middle of the range.

A long signal appears when a candle closes beneath the lower band while the upper band narrows by at least a set percentage. For shorts the pattern is mirrored around the upper band. Positions target a quick move back to the middle Bollinger line with an optional fixed take‑profit.

The setup performs best in range‑bound markets or after a volatility spike begins to fade. The CandlePercent parameter controls how much the opposite band must contract before a trade is allowed, helping avoid whipsaws during strong trends.

Details

• Data: Price candles.
• Entry Criteria:
  • Long: Close below lower band AND upper band contracts by CandlePercent.
  • Short: Close above upper band AND lower band contracts by CandlePercent.
• Exit Criteria:
  • Return to middle band OR take profit percentage.
• Stops: No hard stop; relies on take profit or manual exit.
• Default Values:
  • BBLength = 20
  • BBMultiplier = 2.0
  • CandlePercent = 30
  • TakeProfit = 5
• Filters:
  • Category: Mean reversion
  • Direction: Long & Short
  • Indicators: Bollinger Bands
  • Complexity: Simple
  • Risk level: Medium