Larry Connors’ %b Strategy (Bollinger Band) | Trading Strategies Explained

In chapter 5 of Larry Connors‘ book High Probability Trading, published in 2009, there is a trading strategy called %b strategy. 2 years have passed since the book was published and it could be interesting to see if the strategies are still performing well. Larry Connors tested 20 ETFs from their inception up until the end of 2008, while we test from inception until today.

We backtest the following trading rules:

- The close must be above the 200-day moving average.

- The %b must be below 0.2 for the last three (consecutive) days.

- If 1 and 2 are true, buy on the close.

- Exit when the %b closes above 0.8.

We were not able to replicate the results of Connors because we lack his parameters. However, the results are very good in QQQ and SPY, but very few fills. This is the equity curve for QQQ (shown below)

If you like to know the code of Connors’ strategy plus the code for all the other free strategies on this website, click here:

https://www.quantifiedstrategies.com/larry-connors-b-strategy-bollinger-band/