The Bollinger Band Breakout Trading System was described by Chuck LeBeau and David Lucas in their 1992 book: “Technical Traders Guide to Computer Analysis of the Futures Markets”. The system is a form of breakout system that buys on the next open when the price closes above the top of the Bollinger Band and exits when the price closes back inside the band. Short entries are the mirror opposite with selling taking place when the price closes below the bottom of the Bollinger Band.
The center of the Bollinger Band is defined by an Simple Moving Average of the closing prices using a number of days defined by the parameter Close Average Days. The top and bottom of the Bollinger Band are defined using a fixed-multiple of the standard deviation from the moving average specified by the
parameter Entry Threshold.
The Bollinger Band Breakout Trading system enters at the open following a day that closes over the top of the Bollinger Band or below the bottom of the Bollinger Band. The system exits following a close below the Exit Band which is defined using a fixed-multiple of the standard deviation from the moving average specified by the parameter Exit Threshold.
The value of the Exit Band on the day of entry is used as the stop for the purpose of determining position size using the standard Fixed Fractional position sizing algorithm.
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is a classic trend following system. As such, we included it in our State of Trend Following report, which aims to establish a benchmark to track the generic performance of trend following as a trading strategy.
The Wisdom State of Trend Following reports the performance of a composite index made up of classic trend following systems (Bollinger Band Breakout and others) simulated over multiple timeframes and a portfolio of futures, selected from the range of 300+ futures markets over 30+ exchanges that Wisdom Trading can provide clients access to. The portfolio is global, diversified and balanced over the main sectors.
We publish updates to the report every month, including that of the Bollinger Band Breakout trading system.
Get the low-down on trend following by subscribing to our monthly report. Receive monthly updates on trend following performance, benchmarks and analysis on the markets.
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.