Overview
The Fibonacci Bollinger Bands with RSI Dynamic Take-Profit Strategy is a comprehensive technical analysis strategy that cleverly combines Fibonacci Bollinger Bands (FBB), Relative Strength Index (RSI), and a fixed percentage take-profit mechanism to create a trading system that both captures strong price breakouts and intelligently manages exit points. The strategy builds a custom Bollinger Band system based on the Volume Weighted Moving Average (VWMA) and uses the full 1.0 Fibonacci level of standard deviation as key trigger points. The strategy employs a dual exit mechanism, including a 2% fixed take-profit target and dynamic exit signals based on RSI overbought/oversold conditions, allowing traders to secure profits when price reaches the expected target or when market momentum weakens.

Strategy Principles
The core logic of the strategy is built on the following technical components:

VWMA Baseline: Uses a 200-period Volume Weighted Moving Average as the center axis of the Bollinger Bands. This indicator better reflects the true trend direction in actively traded markets compared to simple moving averages because it considers volume factors.

Fibonacci Bollinger Bands:

• Upper Band (Red): VWMA + (1 × standard deviation)
• Lower Band (Green): VWMA - (1 × standard deviation)

These bands represent potential support and resistance areas for price, and when price breaks through these bands, it is viewed as a strong momentum signal.

RSI Indicator: Uses a 14-period Relative Strength Index to identify potential overbought/oversold conditions:

• RSI < 30: Oversold condition, potentially an exit signal for long positions
• RSI > 70: Overbought condition, potentially an exit signal for short positions

Entry Logic:

• Long Entry: Triggered when closing price breaks above the Upper Band (red)
• Short Entry: Triggered when closing price breaks below the Lower Band (green)

Exit Logic: Employs a dual exit mechanism:

• Fixed Take-Profit (2%): Exit when long position rises 2% or short position falls 2%
• RSI-Based Exit: Exit long position when RSI < 30 or short position when RSI > 70

This strategy combines price breakout signals with momentum indicators to both capture strong trend movements and exit in a timely manner when market momentum weakens, achieving balanced management of entries and exits.

Strategy Advantages

1. Dynamic Price Levels: The strategy uses VWMA as a baseline, which adapts better to market fluctuations in different volume environments compared to traditional simple moving averages, providing more accurate support and resistance levels.

2. Clear Entry Signals: Using price breakouts of Bollinger Bands' upper and lower boundaries as entry trigger points provides clear and definitive signals, reducing trading hesitation and subjective judgment.

3. Dual Exit Protection: Combining fixed percentage take-profit and RSI momentum reversal signals creates a comprehensive exit mechanism that secures profits while avoiding premature exits from strong trends.

4. Risk Control Priority: By setting a 2% fixed take-profit target, the strategy ensures that the risk-reward ratio for each trade is predictable, aiding in long-term capital management.

5. High Adaptability: Core parameters such as VWMA length, standard deviation multiplier, RSI period, and take-profit percentage can all be adjusted according to different market conditions and trader risk preferences.

6. Multi-Market Application: The strategy design is applicable to multiple time periods and can be applied to intraday short-term trading and medium to long-term swing trading, enhancing its practicality.

Strategy Risks

1. False Breakout Risk: In low-volatility, sideways markets, prices may frequently cross Bollinger Band boundaries without forming a real trend, leading to increased false breakout signals and trading costs. The solution is to add additional filtering conditions, such as volume confirmation or longer price confirmation periods.

2. Parameter Sensitivity: The strategy's performance is highly dependent on key parameter settings such as VWMA length and standard deviation multiplier. Different market environments may require different parameter combinations, and incorrect parameter settings may lead to over-trading or missing important opportunities. Historical backtesting is recommended to optimize parameters for different market environments.

3. Limitations of Fixed Take-Profit: The 2% fixed take-profit point may be too conservative in high-volatility markets and too aggressive in low-volatility markets. Consider using ATR (Average True Range) to dynamically adjust take-profit targets to adapt to current market volatility.

4. RSI Signal Lag: As a momentum indicator, RSI has a certain lag, which may lead to suboptimal exit timing in extreme market conditions. This risk can be mitigated by combining RSI signals from multiple time periods or adding other leading indicators.

5. Insufficient Trend Reversal Identification: The strategy mainly relies on RSI to identify potential trend reversals but lacks other trend strength confirmation tools. Consider adding trend strength indicators such as ADX (Average Directional Index) to improve reversal identification capabilities.

Strategy Optimization Directions

1. Dynamic Standard Deviation Adjustment: The current strategy uses a fixed standard deviation multiplier. Consider dynamically adjusting this parameter based on current market volatility. For example, decrease the multiplier in low-volatility markets and increase it in high-volatility markets to adapt to different market conditions.

2. Multi-Timeframe Analysis: Introducing multi-timeframe analysis can significantly enhance the strategy's robustness. For example, only execute trades when the trend direction of a longer timeframe aligns with the current timeframe, which can reduce the risk of counter-trend trading and false breakouts.

3. Intelligent Stop-Loss Mechanism: In addition to fixed take-profit, adding an intelligent stop-loss mechanism based on recent volatility, such as using multiples of ATR as stop-loss points, can better control risk exposure for each trade.

4. Volume Confirmation: Using volume as an entry confirmation condition, requiring significant volume increase accompanying price breakouts of Bollinger Bands, can reduce the probability of false breakouts and improve signal quality.

5. Adaptive RSI Thresholds: Currently, RSI uses fixed 30/70 as overbought/oversold thresholds. Consider dynamically adjusting these thresholds based on historical data to adapt to the volatility characteristics of different markets.

6. Trading Frequency Optimization: Adding cooling periods or signal confirmation mechanisms to avoid frequent trading in the same direction within a short time can reduce trading costs and improve overall strategy efficiency.

Summary
The Fibonacci Bollinger Bands with RSI Dynamic Take-Profit Strategy is a systematic trading approach that integrates multiple elements of technical analysis. It provides entry signals through VWMA-based Bollinger Band breakouts and builds intelligent exit mechanisms using fixed take-profit and RSI reversal signals, offering traders a complete framework that balances risk and reward.

The main advantages of this strategy lie in clear signals, controllable risk, and adjustable parameters, making it applicable to different market environments and trading styles. However, the strategy also faces challenges such as false breakout identification, parameter sensitivity, and limitations of fixed take-profit.

By introducing dynamic parameter adjustments, multi-timeframe analysis, intelligent stop-loss mechanisms, volume confirmation, and adaptive indicator thresholds, the robustness and adaptability of the strategy can be further enhanced. Ultimately, this strategy provides technical traders with a structured method to capture market trends while maintaining disciplined risk management, aligning with the core principles of modern quantitative trading.

Strategy source code

/*backtest
start: 2024-04-02 00:00:00
end: 2025-04-01 00:00:00
period: 1h
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"ETH_USDT"}]
*/

//@version=5
strategy("Fibonacci BB Strategy with RSI + 2% Exit", overlay=true, default_qty_type=strategy.percent_of_equity, default_qty_value=100)

// === INPUTS ===
length = input(200, title="VWMA Length")
src = input(hlc3, title="Source")
mult = input(3.0, title="Deviation Multiplier")
rsiLength = input.int(14, title="RSI Length")
profitTargetPercent = input.float(2.0, title="Profit Target (%)")

// === FBB CALCULATIONS ===
basis = ta.vwma(src, length)
dev = mult * ta.stdev(src, length)
upper_6 = basis + (1 * dev)  // RED line
lower_6 = basis - (1 * dev)  // GREEN line

// === RSI ===
rsi = ta.rsi(close, rsiLength)

// === SIGNAL CONDITIONS ===
buySignal = ta.crossover(close, upper_6)
sellSignal = ta.crossunder(close, lower_6)

// === STRATEGY ENTRIES ===
if buySignal
    strategy.entry("Long", strategy.long)

if sellSignal
    strategy.entry("Short", strategy.short)

// === STRATEGY EXITS ===
// 2% profit in points
longTakeProfit = strategy.position_avg_price * (1 + profitTargetPercent / 100)
shortTakeProfit = strategy.position_avg_price * (1 - profitTargetPercent / 100)

// Long Exit: RSI < 30 or price >= TP
if strategy.position_size > 0
    if close >= longTakeProfit or rsi < 30
        strategy.close("Long")

// Short Exit: RSI > 70 or price <= TP
if strategy.position_size < 0
    if close <= shortTakeProfit or rsi > 70
        strategy.close("Short")

// === PLOTS ===
plot(basis, color=color.fuchsia, linewidth=2, title="VWMA Basis")
plot(upper_6, color=color.red, linewidth=2, title="Upper Band (1x Dev)")
plot(lower_6, color=color.green, linewidth=2, title="Lower Band (1x Dev)")

Strategy parameters

The original address: Fibonacci Bollinger Bands with RSI Dynamic Take-Profit Strategy