managing-apps/src/Managing.Domain/Indicators/Context/BollingerBandsVolatilityProtection.cs

using Managing.Domain.Candles;
using Managing.Domain.Strategies.Base;
using Skender.Stock.Indicators;
using static Managing.Common.Enums;

namespace Managing.Domain.Strategies.Context;

public class BollingerBandsVolatilityProtection : BollingerBandsBase
{
    public BollingerBandsVolatilityProtection(string name, int period, double stdev) : base(name, IndicatorType.BollingerBandsVolatilityProtection, period, stdev)
    {
    }

    /// <summary>
    /// Processes Bollinger Bands volatility protection signals based on bandwidth analysis.
    /// This method applies a veto filter during periods of market extremes:
    /// - Blocks signals when bandwidth is extremely high (dangerous expansion) or extremely low (dead market)
    /// - Validates signals when bandwidth is normal to low (excluding squeeze extremes)
    /// Bandwidth = (UpperBand - LowerBand) / Sma represents market volatility
    /// </summary>
    /// <param name="bbResults">List of Bollinger Bands calculation results</param>
    /// <param name="candles">Candles to process</param>
    protected override void ProcessBollingerBandsSignals(List<BollingerBandsResult> bbResults, IReadOnlyList<Candle> candles)
    {
        var bbCandles = MapBollingerBandsToCandle(bbResults, candles.TakeLast(Period.Value)).ToList();

        if (bbCandles.Count == 0)
            return;

        foreach (var currentCandle in bbCandles)
        {
            var width = currentCandle.Width ?? 0;

            // Determine confidence based on width levels (bandwidth as % of SMA)
            // Lower width = less volatility = higher confidence for trading
            // Higher width = more volatility = lower confidence for trading
            // Typical BB bandwidth values: 0.01-0.08 for most markets
            Confidence confidence;

            if (width >= 0.06) // High volatility - dangerous expansion (6%+)
            {
                // Block all signals during dangerous volatility expansion
                confidence = Confidence.None;
            }
            else if (width <= 0.01) // Extremely low volatility - dead market/squeeze (1% or less)
            {
                // Block all signals in dead markets or extreme squeezes
                confidence = Confidence.None;
            }
            else if (width <= 0.025) // High confidence - optimal for trading (1% - 2.5%)
            {
                // Validate signals during low volatility trending conditions
                confidence = Confidence.High;
            }
            else if (width <= 0.035) // Medium confidence - acceptable for trading (2.5% - 3.5%)
            {
                // Validate signals during normal volatility conditions
                confidence = Confidence.Medium;
            }
            else // Moderate high volatility (3.5% - 6%)
            {
                // Lower confidence during elevated but not extreme volatility
                confidence = Confidence.Low;
            }

            // Context strategies always return TradeDirection.None
            // The confidence level indicates the quality of market conditions
            AddSignal(currentCandle, TradeDirection.None, confidence);
        }
    }

}