MarcoJarquin

Configurable BB+RSI+Aroon strategy backtest for binary options

I wanted to share this strategy that I use myself for binary options trading. After trading binary options for several years I have learned that every single day is unique... assets behave differently every single day. So, when I start the day I want to know which is the optimum combination of parameters in my indicators that will give me the signals I want during the day and I get that by doing a quick backtest of the parameters combination in a specific asset that same day. When trading Binary Options I usually do 3 or 4 trades max per day and, yes, there are moments in which even with the right backtest data the signals fail (I strongly believe that there is no strategy that guarantees 100% success in any type of trade, and this one here is not an exception - but has worked well with some assets). So, here is my contribution to improve your productivity by automating a bit that backtesting part.

How this script works?
It is a simple price crossunder / crossover Bollinger Bands (BB) with a confirmation from RSI overbought / oversold signals and a fast Aroon . You will see the BB plotted with its confirmations:
(1) a blue circle that plots in the chart when the price is coming back inside the channel (within the Bollinger Bands )
(2) an orange square that plots in the chart when the RSI is coming back from the overbought or oversold areas
(3) a triangle that could be red or green depending on the Aroon confirmation: Red if Aroon Down is crossing down Aroon Up or green if vice versa.

The strategy will call for long (Call) if:
(1) the price is crossing over the lower band of the Bollinger Bands , coming back inside the channel
(2) Aroon Up is crossing or has crossed above Aroon Down
(3) RSI is crossing over the oversold limit

Consequently, the strategy will call for a short (Put) if:
(1) the price is crossing down the upper band of the Bollinger Bands , coming back inside the channel
(2) Aroon Down is crossing or has crossed below Aroon Up
(3) RSI is crossing under the overbought limit

You can configure:
1. Aroon length (keep it as fast as possible: 3, 4 or 5 are recommended values)
2. The point where Aroon Up and Aroon Down cross to make the signal valid (50 is by default. It could also be 25 or 75)
3. The RSI length
4. RSI Overbought and Oversold limits (they do not need to be symmetric: you can use 29 and 93, for example)
5. Bollinger Bands length and standard deviation
6. Number of bars to keep your option open. Depending on the timeframe used, this will determine the time you will keep your binary option open. If you are in a 1 min chart and keep this parameter in 3, then you will need to configure your binary option to expire in 3 minutes.

How to evaluate your backtest?
In Binary Options you only need the success rate, so what I do is that when I am manually updating the parameters I keep my strategy tester window open checking the winning trades vs losing trades ratio ("Percent Profitable"). I personally will only keep an asset monitored looking for signals that day if the Percent Profitable on the backtest of the same day is above 80%.

Regarding the code: it is open, public and free. No need to ask for permission if you want to copy+paste and use it in whole or parts.


Happy pip hunting!

-marco
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