Bollinger Band and RSI Mean Reversion with ATR Risk Controls
Summary
This mean-reversion strategy looks for price extremes confirmed by RSI. It buys when price closes below the lower Bollinger Band while RSI is below its oversold threshold, and sells short when price closes above the upper band while RSI exceeds its overbought threshold. ATR sets the stop distance, while a smaller profit target relative to that distance and equity-based position sizing define trade risk and reward.
The document specifies a 20-period Bollinger calculation, 14-period RSI and ATR, and a 2% equity risk allocation per trade. It includes BTC-USDT futures backtest settings covering part of 2024, but provides no performance evidence despite its high-win-rate framing. The approach can be vulnerable to persistent trends, delayed indicator signals, volatility spikes, and trading costs; a lower reward relative to risk also makes results dependent on maintaining a sufficiently high win rate. Suggested refinements include trend filters, parameter adaptation, volume confirmation, and improved sizing.
Key ideas
- Long and short entries require both a Bollinger Band breach and an RSI extreme.
- ATR defines stop distances, and the profit target is set at 0.75 times that distance.
- Position size is calculated to risk 2% of equity per trade.
- The published backtest settings include no performance statistics.
- Persistent trends, costs, and volatile conditions may weaken the mean-reversion approach.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.