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2001issue C091-5

Ranked candlestick sentiment to band-cross entries

Each candlestick can be stored as a CandleCode rank on a bearish-to-bullish scale. A documented smoother and a Bollinger reference band then turn that rank series into a long-short rule whose decision lines stay comparable when the rank amplitude changes.

  • CandleCode attaches a numeric rank to each candlestick so strongly bearish structure scores lowest and strongly bullish structure scores highest.
  • A double-smoothed CandleCode follows major sentiment swings and can mark the start of bullish and bearish reversals while hourly price is still moving sideways.
  • A fixed-threshold cross uses constant upper and lower levels, but those levels sit in different parts of the range after the smoothed rank jumps in amplitude.
  • A Bollinger reference band replaces the constants with a volatility-scaled envelope, and asymmetric band width lets the four-parameter band system search lower and upper deviations separately.
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Current trackBollinger Bands84 readingsCandlestick patterns100 readingsMoving average449 readings

A rank for every candlestick

Each candlestick is mapped to a numeric CandleCode rank. The rank is lowest for strongly bearish structure and highest for strongly bullish structure.

CandleCode converts typical pattern readings into an ordered sentiment scale. The later entry and exit rules act on that rank series, not on a named list of candle shapes.

A smoother that isolates sentiment turns

The first design choice is a documented smoother. A double-smoothed CandleCode is a CandleCode series passed through a longer moving average and then a short second average or triplet filter.

On hourly British pound prices from 26 February to 15 March 2001, a 21-period simple moving average of the CandleCode, then a triple two-point moving-average filter, followed major swings. It marked a bullish turn on 26 February and bearish turns on 2 March and 7 March.

That double-smoothed series described British pound consolidation between 1.46 and 1.4750. It flagged a 13 March support-break risk after a 1 to 13 March double top, and it turned bullish ahead of the 15 March reversal.

On hourly British pound prices from 23 March to 5 April 2001, the appropriately smoothed CandleCode marked the start of both bullish and bearish reversals while price was moving sideways rather than in a long-lasting trend.

When fixed levels stop being comparable

A threshold system enters long when an exponentially double-smoothed CandleCode, first length 21 and then length 3, crosses a lower fixed level from below. It enters short when that series crosses an upper fixed level from above. The first smoothing length and both levels are left as backtest parameters.

That rule is a fixed-threshold cross: a long or a short when the smoothed rank crosses a constant lower or upper level from the outside.

On a longer hourly British pound sample that includes 14 December 2000 through 12 March 2001, the same double-smoothed CandleCode showed nonuniform volatility. Amplitude jumped in early February and late March, so fixed decision levels sat in different parts of the indicator range.

Fixed CandleCode levels fail when rank volatility jumps

Double-smoothed hourly GBP CandleCode (Dec 2000–Mar 2001) with the article’s fixed sell and buy rails. The same rails are crossed by two later spikes whose amplitude is no longer comparable, which is why the source replaces those rails with a volatility-scaled band. Values were read off Figure 3’s plotted indicator pane, not from a table.
Double-smoothed hourly GBP CandleCode (Dec 2000–Mar 2001) with the article’s fixed sell and buy rails. The same rails are crossed by two later spikes whose amplitude is no longer comparable, which is why the source replaces those rails with a volatility-scaled band. Values were read off Figure 3’s plotted indicator pane, not from a table.GBPUSD · 1h · 2000-12-14T00:00:00.000Z to 2001-03-24T00:00:00.000Z

First exponential smooth length 21, second exponential smooth length 3. Thresholds are the red and green horizontals drawn on Figure 3; the source does not print those level numbers in the text.

Band crosses on the smoothed rank

Because those fixed lines do not adapt to indicator-volatility jumps, the upper decision line is replaced by a Bollinger Band top and the lower line by a Bollinger Band bottom of the smoothed CandleCode. Independent deviation factors are allowed on each side.

The moving envelope is a Bollinger reference band: a volatility-scaled envelope around the smoothed rank that supplies moving upper and lower decision lines. Separate deviation multipliers on those two lines are asymmetric band width.

One hourly British pound window from 18 to 26 January 2001 used nonsymmetric Bollinger Bands on a simple moving average of CandleCode, with a smaller lower-band deviation than the upper-band deviation. Another window from 30 January to 8 February 2001 used a symmetric band on a CandleCode smoothed by a 21-period average and then a triplet.

The band-crossing system opens long when the double-smoothed CandleCode crosses the lower band from below and opens short when it crosses the upper band from above. A search on November 2000 through February 2001 selected average length 45, band period 13, lower deviation 1.2, and upper deviation 1.5. One illustrated short on 23 March was closed by a 70-point stop.

Those searchable inputs are the four-parameter band system: CandleCode average length, band lookback, lower-band deviation, and upper-band deviation.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
17 of 45 in the Bollinger Bands track
20021-2 pp.Next on Bollinger BandsCombining Bollinger Bands, RSI, and a stop-lossA standard-deviation envelope is drawn around a moving average from measured dispersion, so the bands widen and narrow when variability changes rather than sitting at a fixed percentage offset.
All readings on this track · 45 readings
  1. 1992Constructing volatility-scaled bands with relative strength index confirmation
  2. 1994Implied volatility as a band-defined regime filter for index options
  3. 1995Constructing projection bands from least-squares slopes
  4. 1995Constructing regression projection bands and range oscillators
  5. 1996Constructing Bollinger bands, percent-b, and stochastics
  6. 1996Constructing mechanical rules from Bollinger Bands and stochastics
  7. 1996Constructing a standard-error envelope around a linear regression
  8. 1996Dual-horizon ratio envelopes and regression error channels
  9. 1997Rational group structure with a trend screen, RSI, and bands
  10. 1997Asymmetric volatility band construction
  11. 1998Constructing three-state filters from Bollinger band envelopes
  12. 1999Combination filters with Bollinger Bands and the relative strength index
  13. 1999Constructing stochastic timed exits and band-RSI reversals
  14. 1999Evaluating Bollinger Bands against fixed-width and range-based envelopes
  15. 2000Constructing a Bollinger Band target as a forward price
  16. 2001Numeric candlestick encoding with local size bands
  17. 2001Ranked candlestick sentiment to band-cross entries
  18. 2002Combining Bollinger Bands, RSI, and a stop-loss
  19. 2002Bollinger Bands remain filters, not forecasts
  20. 2002Constructing a stochastic RSI with Bollinger bands
  21. 2002Constructing a StochRSI and Bollinger mechanical system
  22. 2003Constructing volatility-scaled Bollinger envelopes
  23. 2003Why tick breadth fails as a market personality
  24. 2005Constructing Bollinger bands versus fixed trading bands
  25. 2006Squared versus absolute deviation in envelope construction
  26. 2006Confirming yen crossovers with implied volatility and bands
  27. 2006A daily candle reversal is a hypothesis until shorter sessions fail at the same zone
  28. 2008Rebuild the Relative Strength Index as price-scale bands
  29. 2008Reading Relative Strength Index extremes on one price axis with Bollinger Bands and moving averages
  30. 2011Three-filter confirmation for short-swing futures
  31. 2011Constructing an inverse Fisher stochastic with bands and averages
  32. 2012Constructing a Bollinger Band indicator suite
  33. 2012Stacking price extremes, crossovers, bands, and MACD
  34. 2012Adaptive Bollinger band impulse, trend, and momentum filters
  35. 2013Rescaling stochastic, percent-B, and wave-count parameters
  36. 2014Industry-group quartile pivots as a Bollinger Bands case study
  37. 2014Bollinger Bands as adaptive price envelopes: a 2014 classroom case
  38. 2016Trend-channel entry rules from stacked moving averages
  39. 2016A permission stack for Bollinger, RSI, and the 50-period average
  40. 2017Constructing weighted Bollinger bands and volume averages
  41. 2017Four swing-entry rules that share a timed exit
  42. 2017Two-wave monthly cycles as a regime filter
  43. 2019Constructing exponential-deviation-bands from a midline-average
  44. 2020Critiquing exponential variants of Bollinger Bands
  45. 2020Constructing selectable volatility and moving-average bands
By fieldEntry and exit rules206 readingsBy year200176 readings
All 84 readings tagged Bollinger Bands
Also on Bollinger Bands5 readings
2001Numeric candlestick encoding with local size bands2001Turning one candle into a ranked numeric object2001Encoding candle structure as a numeric filter2006A daily candle reversal is a hypothesis until shorter sessions fail at the same zone1992Constructing volatility-scaled bands with relative strength index confirmation