Bollinger Band Exhaustion and RSI Mean-Reversion Strategy
Summary
This educational script combines long mean-reversion entries with short setups based on price extremes and bearish divergence. It calculates Bollinger Bands, main and fast RSI values, and MACD. A long setup requires a close at or below the lower band with both RSI readings below their thresholds. Short setups use an upper-band RSI exhaustion condition or a new price high that RSI or MACD does not confirm. Exits use opposing exhaustion signals, lower-band or oversold conditions for shorts, and optional stop-loss and time-based rules.
The script exposes trade direction, indicator thresholds, divergence lookback, stops, and chart display options. Its strategy settings specify hypothetical commission, slippage, and full-equity sizing, but the document provides no performance results or market-specific validation. The author describes it as a simplified public research example; it excludes private risk management, execution, allocation, routing, and production parameters. Backtests may therefore differ from live execution, and the listed defaults should not be treated as validated settings.
Key ideas
- Long entries require lower-band price exhaustion and oversold main and fast RSI readings.
- Short entries can follow upper-band exhaustion or a fresh price high that RSI or MACD fails to match.
- Long and short exits use different indicator and band conditions, with optional stop-loss and time-based controls.
- The public script omits production risk, execution, allocation, and routing systems, and supplies no performance evidence.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.