How does the Bollinger Band bot work?

Our Bollinger Band bot is inspired by the John Bollinger (https://www.investopedia.com/terms/b/bollingerbands.asp) technical indicator of the same name. We have made setting it up super easy and intuitive.

The ‘Start with’ combo box (see figure) allows you to start the bot in three modes: buy, sell or any. Starting in any mode will activate both the buy and sell thresholds and is great if you are not sure which way the market will initially move.

Rather than placing limit orders like the static ping pong and mArgin maker bots, the Bollinger Band bot places spot orders. Once the bot triggers a spot order it will place it, which means you need to be prepared that the actual trade might not be at the price the order was triggered at.

How does an order get triggered? There are two bands, a sell band (solid red line) and a buy band (solid blue line), that can be configured. These are set relative to the Bollinger Bands. For an order to trigger, the opposite orderbook has to intersect the buy/sell band. For example, in the buy case, the top of sell orderbook has to touch the ‘Current buy threshold’. Note that in volatile markets this means that it can commonly occur that the orderbook rapidly retreats after triggering a spot order. This results in the spot order having to overcome the spread to get filled. On certain pairs this can be some percentage points off the trigger price.

In order to protect against unwanted losses it is possible to set a Min effective gain parameter. This can be set on both sides. In the figure the Minimum effective gain displaces the current buy threshold by more than 4% to ensure that the desired Minimum effective gain is achieved.

In the figure above, a minimum effective gain ensures that the bot does not buy back in too soon in a market that had trended upwards. Also note that the two sell trades (small yellow triangles) went through above the Bollinger Band sell threshold because of the Min effective gain setting.

Stop loss is also available on both sides. On the buy side a stop loss can be setup relative to the last buy the bot performed. This is visualised in the chart and the percentage can be manipulated by dragging the annotation up or down. Note that if stop loss is triggered, the bot will stop trading.