Bollinger Bands strategy on Deriv: how the band bots trade

Bollinger Bands draw a channel around the price. The middle line is the average of the last 20 ticks, and the upper and lower bands sit a set distance above and below it, a distance that grows when the market is busy and shrinks when it is quiet. A Bollinger Bands strategy on Deriv buys a contract when the price does something notable against that channel: pokes outside it, rides inside it, or squeezes it narrow. BinaryTick has seven free bots built on the bands, across four contract types, each with its rule on the card before you press Run bot.

How Bollinger Bands are worked out

Most band bots on BinaryTick use the standard settings: 20 ticks and 2 standard deviations. A standard deviation is the typical distance of a tick from the average. It is small when the ticks bunch together and large when they spread out.

These are 20 ticks in a row on Volatility 100, read from Deriv:

658.75, 658.77, 658.72, 658.87, 658.78, 658.86, 658.80, 658.84, 658.95, 658.75, 658.94, 659.06, 659.10, 658.92, 658.88, 658.94, 658.97, 658.92, 658.79, 658.81

1. The middle band is their average: 658.87.
2. The standard deviation of those 20 ticks comes to 0.10. Most ticks sit within about 0.10 of the average.
3. The upper band is the middle plus 2 standard deviations: 658.87 + 0.20 = 659.07.
4. The lower band is the middle minus 2 standard deviations: 658.87 − 0.20 = 658.67.

The last tick, 658.81, sits inside the channel, a little under the middle. This was a quiet stretch: the channel here is 0.40 wide, where Volatility 100's is typically about 1.1. On the next tick the oldest price drops out, the new one comes in, and all three lines move.

This is the standard calculation, and it is what the Bollinger Bands block in Deriv's Bot Builder does. The BinaryTick bots use that same block.

Why the bands suit every market

The bands size themselves to the market they are on. Over 1,000 ticks, the channel on Volatility 100 was typically about 1.1 wide. On Volatility 75, whose price sits in the tens of thousands, it was typically about 44 wide. A rule like "buy when the price breaks out of the channel" therefore works the same way on either market. Settings measured in price, such as a barrier offset, still need sizing to the market: 0.2 is a real distance on Volatility 100 and almost nothing on Volatility 75.

A tick outside the bands is uncommon. Over those ticks on Volatility 100, the price closed above the upper band or below the lower band on 112 ticks out of 981, about one in nine. The Band deviation decides how often:

A smaller deviation draws the bands closer, so the price leaves them more often and a breakout bot trades more. A larger one draws them wider, and the bot waits longer between trades.

The Bollinger Bands bots on BinaryTick

Every bot below is free and explains its rule under How it works on its card. Bollinger Bounce keeps its bands fixed at 20 ticks and 2 deviations; the other six show theirs under Settings. Band Stretch, Squeeze Break Sniper, Band Ride and Channel Escape ship on Volatility 100. They read the channel in four ways.

Bots that trade back towards the middle. These read a tick outside the channel as a move that has gone far, and buy the turn.

• Bollinger Bounce is a Rise / Fall bot on Volatility 25, with a 5 tick contract. It buys Rise while the last tick is under the lower band, and Fall at any other time. The price is under the lower band only a small share of the time, so most of its trades are Fall. It trades often.
• Band Pierce Sniper is a Rise / Fall bot on Volatility 75 that needs three things on the same tick. It buys Rise when the price is under the lower band, RSI (a 0 to 100 score of how one-sided the recent ticks have been) is at 30 or below, and the price sits under its 50-tick average. Fall is the mirror image. All three at once is rare, so it can watch for a long time. Its bands use 2.5 deviations rather than 2.
• Volatility Regime Switch is a Rise / Fall bot on Volatility 75 that measures how wide the channel is first. When the channel is wide, it trades back towards the middle: Rise under the lower band, Fall over the upper band. When the channel is narrow, it follows a 20-tick moving average instead: Rise with the price above it, Fall below.

Bots that trade the break. These read a tick outside the channel as a market that is moving, and expect it to keep going.

• Band Stretch trades Touch / No Touch with a barrier 0.2 above the entry. A break above the upper band buys Touch, and a break below the lower band buys No Touch. Inside the channel it waits.
• Squeeze Break Sniper trades Higher / Lower and only buys Higher. It waits for the channel to narrow to under 0.7 times the width of a 60-tick channel, a quiet stretch, and then for the price to push above the top of it.

A bot that trades inside the channel.

• Band Ride also trades Higher / Lower and only buys Higher. It buys when the price is above the middle band but still under the upper one, where the market is rising and has not yet reached the edge. Below the middle, or outside the channel, it waits.

A bot that compares the channel with a corridor.

• Channel Escape trades Stays In / Goes Out, a contract with one barrier above the entry and one below. It draws its bands over 40 ticks. If the channel is wider than the gap between the two barriers, it buys Goes Out; if it is narrower, Stays In. Each contract runs for 5 minutes, so it holds one position at a time.

The settings that matter

Band period. How many ticks the bands are drawn over, 20 on most of these bots and 40 on Channel Escape. A shorter period reacts faster to a change in the market. On Band Pierce Sniper and Squeeze Break Sniper this setting is called Channel period.

Band deviation. How far the bands sit from the middle, in standard deviations, 2 by default and 2.5 on Band Pierce Sniper. The table above shows what it does to the number of breakouts. On Band Pierce Sniper and Squeeze Break Sniper it is called Channel width. Band Stretch's card says it directly: "Lower the band deviation to widen what counts as a breakout."

Barrier offset. On Band Stretch, Band Ride and Squeeze Break Sniper, how far above the entry the barrier sits, 0.2 by default. A barrier further away pays more and needs a bigger move.

Regime threshold (%) and Squeeze ratio. On Volatility Regime Switch, the channel width that separates the two rules, 0.08% of the price by default. On Squeeze Break Sniper, how narrow the channel has to get, 0.7 by default; its card notes that raising it makes the bot trade more often.

Stake, limits and martingale. The Rise / Fall, Touch / No Touch and Stays In / Goes Out bots ship with a 1 USD stake, a 2.1x martingale with a 5 USD max stake, and a 10 USD take profit and stop loss. The Higher / Lower bots use 1.5x and a 4 USD max stake. Untick Use martingale for a flat stake. The martingale guide explains the ladder and the stop loss and take profit guide explains every limit.

Building your own Bollinger Bands bot

Deriv's own Bot Builder tutorial uses Bollinger Bands as its example: buy Rise when the last tick falls under the lower band. Bollinger Bounce is that rule, ready to run, with limits on the card. Open it with Edit in Bot Builder to see the Bollinger Bands block and the rule around it, then change the period, the deviation or the contract with blocks. The Bot Builder guide walks through the editor.

Run one now

Open Bollinger Bounce and run it on your demo balance first. It trades often, so you will see a Rise under the lower band within a short session. Then try Band Stretch to see the opposite reading, where a break of the channel is a sign the market is moving. The Rise / Fall bots guide and the Touch / No Touch bots guide cover the rest of those families.