OPEN-SOURCE SCRIPT
Updated Reversal Trading Bot Strategy[BullByte]
Overview:
The indicator Reversal Trading Bot Strategy[BullByte] is crafted to capture potential market reversal points by combining momentum, volatility, and trend alignment filters. It uses a blend of technical indicators to identify both bullish and bearish reversal setups, ensuring that multiple market conditions are met before entering a trade.
Core Components:
Technical Indicators Used:
RSI (Relative Strength Index):
Purpose: Detects divergence conditions by comparing recent lows/highs in price with the RSI.
Parameter: Length of 8.
Bollinger Bands (BB):
Purpose: Measures volatility and identifies price levels that are statistically extreme.
Parameter: Length of 20 and a 2-standard deviation multiplier.
ADX (Average Directional Index) & DMI (Directional Movement Index):
Purpose: Quantifies the strength of the trend. The ADX threshold is set at 20, and additional filters check for the alignment of the directional indicators (DI+ and DI–).
ATR (Average True Range):
Purpose: Provides a volatility measure used to set stop levels and determine risk through trailing stops.
Volume SMA (Simple Moving Average of Volume):
Purpose: Helps confirm strength by comparing the current volume against a 20-period average, with an optional filter to ensure volume is at least twice the SMA.
User-Defined Toggle Filters:
Volume Filter: Confirms that the volume is above average (or twice the SMA) before taking trades.
ADX Trend Alignment Filter: Checks that the ADX’s directional indicators support the trade direction.
BB Close Confirmation: Optionally refines the entry by requiring price to be beyond the upper or lower Bollinger Band rather than just above or below.
RSI Divergence Exit: Allows the script to close positions if RSI divergence is detected.
BB Mean Reversion Exit: Closes positions if the price reverts to the Bollinger Bands’ middle line.
Risk/Reward Filter: Ensures that the potential reward is at least twice the risk by comparing the distance to the Bollinger Band with the ATR.
Candle Movement Filter: Optional filter to require a minimum percentage move in the candle to confirm momentum.
ADX Trend Exit: Closes positions if the ADX falls below the threshold and the directional indicators reverse.
Entry Conditions:
Bullish Entry:
RSI Divergence: Checks if the current close is lower than a previous low while the RSI is above the previous low, suggesting bullish divergence.
Bollinger Confirmation: Requires that the price is above the lower (or upper if confirmation is toggled) Bollinger Band.
Volume & Trend Filters: Combines volume condition, ADX strength, and an optional candle momentum condition.
Risk/Reward Check: Validates that the trade meets a favorable risk-to-reward ratio.
Bearish Entry:
Uses a mirror logic of the bullish entry by checking for bearish divergence, ensuring the price is below the appropriate Bollinger level, and confirming volume, trend strength, candle pattern, and risk/reward criteria.
Trade Execution and Exit Strategy:
Trade Execution:
Upon meeting the entry conditions, the strategy initiates a long or short position.
Stop Loss & Trailing Stops:
A stop-loss is dynamically set using the ATR value, and trailing stops are implemented as a percentage of the close price.
Exit Conditions:
Additional exit filters can trigger early closures based on RSI divergence, mean reversion (via the middle Bollinger Band), or a weakening trend as signaled by ADX falling below its threshold.
This multi-layered exit strategy is designed to lock in gains or minimize losses if the market begins to reverse unexpectedly.
How the Strategy Works in Different Market Conditions:
Trending Markets:
The ADX filter ensures that trades are only taken when the trend is strong. When the market is trending, the directional movement indicators help confirm the momentum, making the reversal signal more reliable.
Ranging Markets:
In choppy markets, the Bollinger Bands expand and contract, while the RSI divergence can highlight potential turning points. The optional filters can be adjusted to avoid false signals in low-volume or low-volatility conditions.
Volatility Management:
With ATR-based stop-losses and a risk/reward filter, the strategy adapts to current market volatility, ensuring that risk is managed consistently.
Recommendation on using this Strategy with a Trading Bot:
This strategy is well-suited for high-frequency trading (HFT) due to its ability to quickly identify reversal setups and execute trades dynamically with automated stop-loss and trailing exits. By integrating this script with a TradingView webhook-based bot or an API-driven execution system, traders can automate trade entries and exits in real-time, reducing manual execution delays and capitalizing on fast market movements.
Disclaimer:
This script is provided for educational and informational purposes only. It is not intended as investment advice. Trading involves significant risk, and you should always conduct your own research and analysis before making any trading decisions. The author is not responsible for any losses incurred while using this script.
The indicator Reversal Trading Bot Strategy[BullByte] is crafted to capture potential market reversal points by combining momentum, volatility, and trend alignment filters. It uses a blend of technical indicators to identify both bullish and bearish reversal setups, ensuring that multiple market conditions are met before entering a trade.
Core Components:
Technical Indicators Used:
RSI (Relative Strength Index):
Purpose: Detects divergence conditions by comparing recent lows/highs in price with the RSI.
Parameter: Length of 8.
Bollinger Bands (BB):
Purpose: Measures volatility and identifies price levels that are statistically extreme.
Parameter: Length of 20 and a 2-standard deviation multiplier.
ADX (Average Directional Index) & DMI (Directional Movement Index):
Purpose: Quantifies the strength of the trend. The ADX threshold is set at 20, and additional filters check for the alignment of the directional indicators (DI+ and DI–).
ATR (Average True Range):
Purpose: Provides a volatility measure used to set stop levels and determine risk through trailing stops.
Volume SMA (Simple Moving Average of Volume):
Purpose: Helps confirm strength by comparing the current volume against a 20-period average, with an optional filter to ensure volume is at least twice the SMA.
User-Defined Toggle Filters:
Volume Filter: Confirms that the volume is above average (or twice the SMA) before taking trades.
ADX Trend Alignment Filter: Checks that the ADX’s directional indicators support the trade direction.
BB Close Confirmation: Optionally refines the entry by requiring price to be beyond the upper or lower Bollinger Band rather than just above or below.
RSI Divergence Exit: Allows the script to close positions if RSI divergence is detected.
BB Mean Reversion Exit: Closes positions if the price reverts to the Bollinger Bands’ middle line.
Risk/Reward Filter: Ensures that the potential reward is at least twice the risk by comparing the distance to the Bollinger Band with the ATR.
Candle Movement Filter: Optional filter to require a minimum percentage move in the candle to confirm momentum.
ADX Trend Exit: Closes positions if the ADX falls below the threshold and the directional indicators reverse.
Entry Conditions:
Bullish Entry:
RSI Divergence: Checks if the current close is lower than a previous low while the RSI is above the previous low, suggesting bullish divergence.
Bollinger Confirmation: Requires that the price is above the lower (or upper if confirmation is toggled) Bollinger Band.
Volume & Trend Filters: Combines volume condition, ADX strength, and an optional candle momentum condition.
Risk/Reward Check: Validates that the trade meets a favorable risk-to-reward ratio.
Bearish Entry:
Uses a mirror logic of the bullish entry by checking for bearish divergence, ensuring the price is below the appropriate Bollinger level, and confirming volume, trend strength, candle pattern, and risk/reward criteria.
Trade Execution and Exit Strategy:
Trade Execution:
Upon meeting the entry conditions, the strategy initiates a long or short position.
Stop Loss & Trailing Stops:
A stop-loss is dynamically set using the ATR value, and trailing stops are implemented as a percentage of the close price.
Exit Conditions:
Additional exit filters can trigger early closures based on RSI divergence, mean reversion (via the middle Bollinger Band), or a weakening trend as signaled by ADX falling below its threshold.
This multi-layered exit strategy is designed to lock in gains or minimize losses if the market begins to reverse unexpectedly.
How the Strategy Works in Different Market Conditions:
Trending Markets:
The ADX filter ensures that trades are only taken when the trend is strong. When the market is trending, the directional movement indicators help confirm the momentum, making the reversal signal more reliable.
Ranging Markets:
In choppy markets, the Bollinger Bands expand and contract, while the RSI divergence can highlight potential turning points. The optional filters can be adjusted to avoid false signals in low-volume or low-volatility conditions.
Volatility Management:
With ATR-based stop-losses and a risk/reward filter, the strategy adapts to current market volatility, ensuring that risk is managed consistently.
Recommendation on using this Strategy with a Trading Bot:
This strategy is well-suited for high-frequency trading (HFT) due to its ability to quickly identify reversal setups and execute trades dynamically with automated stop-loss and trailing exits. By integrating this script with a TradingView webhook-based bot or an API-driven execution system, traders can automate trade entries and exits in real-time, reducing manual execution delays and capitalizing on fast market movements.
Disclaimer:
This script is provided for educational and informational purposes only. It is not intended as investment advice. Trading involves significant risk, and you should always conduct your own research and analysis before making any trading decisions. The author is not responsible for any losses incurred while using this script.
Release Notes
// Initial capital is set to 1000 USD, and order size is set to 30% of account equity.// A 0.04% commission and slippage have been added to provide a more realistic performance report.
Release Notes
Strategy Update: Reversal Trading Bot 📌 Key Updates & Enhancements
1. ✅ Fixed Bearish (Short) Entry Logic
- Previously, ADX alignment was too restrictive, blocking valid short signals.
- Now, both Long & Short entries trigger correctly with proper trend confirmation.
2. 🔥 Optimized Entry/Exit Conditions
- No More Premature Exits: Removed restrictive exit filters (ADX Trend Exit, BB Mean Reversion Exit, RSI Divergence Exit).
- Pure Trend-Following with Trailing Stops: Exits now based on ATR-based trailing stops (1% trail).
3. 📊 Tested on BTC/USD (Binance) – 30min Chart
- Works best in trending markets (bullish & bearish).
- Uses Volume Filter (2x SMA) for high-probability entries.
4. 💰 Realistic Backtest Settings
- Initial Capital: $1,000
- Position Size: 30% of equity per trade
- Commission: 0.04% (Binance-like fees)
- Slippage: 1% (accounts for volatility)
🚀 Why This Strategy Stands Out?
🎯 Unique Edge: Smart Divergence + Trend Confirmation
Most reversal strategies fail because:
❌ They rely only on RSI divergence (false signals in strong trends).
❌ They ignore volume & ADX confirmation, leading to weak entries.
This strategy combines:
✔ True RSI Divergence (Regular & Hidden)
✔ Bollinger Band Extreme Confirmation (Lower Band for Longs, Upper Band for Shorts)
✔ Volume Spike Filter (2x SMA volume = institutional interest)
✔ ADX Trend Strength Check (Avoids ranging markets)
⚡ Entry Conditions (Optimized for High-Probability Trades)
📈 Long Entry (Buy Dips in Uptrend)
1. Bullish RSI Divergence (Price makes lower low, RSI makes higher low).
2. Price touches Lower Bollinger Band (Mean-reversion bounce).
3. Volume Spike (2x SMA volume = strong buying pressure).
4. ADX > 20 & DI+ > DI- (Confirms uptrend strength).
📉 Short Entry (Sell Rallies in Downtrend)
1. Bearish RSI Divergence (Price makes higher high, RSI makes lower high).
2. Price Touches Upper Bollinger Band (Rejection zone).
3. Volume Spike (2x SMA volume = strong selling pressure).
4. ADX > 20 & DI- > DI+ (Confirms downtrend strength).
🛑 Exit Logic (Trailing Stop for Maximum Profits)
- No More Early Exits: Removed restrictive filters that cut winning trades short.
- ATR-Based Trailing Stop (1%): Locks in profits as the trend extends.
- No Manual Intervention Needed: Fully systematic.
⚠️ Disclaimer & Risk Warning
DO NOT TRADE THIS SCRIPT MANUALLY.
- This is a tested algorithmic strategy, not financial advice.
- Use at your own risk. Crypto markets are highly volatile.
- Backtest first before live trading. Adjust position sizing based on risk tolerance.
- Margin trading increases risk. Only use leverage you can afford to lose.
🔮 My Thoughts
This strategy is **ideal for swing traders** who want:
✅ High-probability reversals with trend confirmation
✅ Reduced false signals via volume & ADX filters
✅ Hands-free trading with trailing stops
👉 Next Steps:
1. Backtest on multiple assets (ETH, XRP, etc.).
2. Optimize parameters for different timeframes.
3. Start small in live markets & scale gradually.
🔥 Happy Trading! Let the algorithm work for you. 🚀
Release Notes
No functional changes. Updated metadata and comments for better clarity and compliance.Release Notes
Updated core Logic for performance improvementsAdded Alert
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
For quick access on a chart, add this script to your favorites — learn more here.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
For quick access on a chart, add this script to your favorites — learn more here.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.