Bollinger Band and RSI Mean Reversion with Fixed and Trailing Stops

Summary

This strategy looks for reversals when price crosses beyond a Bollinger Band and RSI confirms an extreme reading. It uses a 30-period simple moving average with bands two standard deviations away, plus a 14-period RSI. A cross below the lower band with RSI below 30 triggers a long; a cross above the upper band with RSI above 70 triggers a short. The described implementation applies both a fixed stop and a trailing stop, each set to 40 points.

The document explains the rationale for combining a volatility-based price extreme with a momentum indicator, and lists possible adaptations such as volatility-scaled stops, trend filters, volume checks, and position sizing. Published backtest settings specify daily ETH/USDT futures data over roughly a year, but no performance results are supplied. The approach can incur repeated losses when prices trend, and fixed point stops may not suit instruments or volatility regimes equally well. The document also notes that position sizing and time-based exits are absent.

Key ideas

• Bollinger Bands identify price extremes relative to a moving average and recent volatility.
• RSI confirms overbought or oversold conditions before a contrarian entry.
• The strategy applies fixed and trailing stops to both long and short trades.
• Persistent trends can keep indicators extreme and expose mean-reversion entries to losses.
• The published settings describe an ETH/USDT futures backtest, but provide no performance statistics.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.