Bollinger Band Mean Reversion After Full-Candle Breakouts

Summary

This strategy treats a full candle outside a Bollinger Band as a possible mean-reversion setup. It calculates bands from closing prices, then looks for a long after a bearish candle lies entirely below the lower band, or a short after a bullish candle lies entirely above the upper band. The breakout candle’s extreme sets the stop, and the middle band is the initial target.

Entries are submitted as stop orders at the signal candle’s opposite extreme, with a session window and an order cancellation rule after a configurable number of candles. Positions are exited at the moving middle band or stop, with an optional intraday close. Published settings describe a BTC/USDT futures backtest over a short period, but no performance results are provided. The method assumes an extreme move will reverse; a genuine trend breakout can invalidate that premise. The document also notes possible slippage, premature exits, conservative targets, and repeated signals in choppy markets.

Key ideas

• A candle wholly outside a Bollinger Band is treated as a potential reversal signal.
• The strategy buys below the lower band and sells above the upper band, targeting the middle band.
• The signal candle’s extreme provides a stop level, while session and order-expiry rules constrain entries.
• Strong breakouts may continue as trends, and slippage or choppy conditions can weaken results.

Tags

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