Bollinger Band Mean Reversion with a Fibonacci Lower Threshold

Summary

This long-only strategy combines a volume-weighted moving average Bollinger Band basis with a lower threshold set at 0.618 of the band’s standard-deviation distance. It permits entries when the 50-period exponential moving average is above the 200-period average and price reaches or falls below the lower threshold. The stated parameters include a 50-period band length, a 1.5 deviation multiplier, and a five-percent stop loss. The exit rule closes a position after price crosses above the upper 0.618 band.

The document presents the rules, parameter values, and a BTC/USDT futures backtest configuration for October 2023, but does not report performance results. It cautions that the lower band is not guaranteed support, the moving-average filter can give false signals, and the reversion period is uncertain. The fixed stop may not fit changing volatility. Suggested refinements include testing parameters, adding indicators, and using volatility-based or trailing stops, but no evidence is supplied that these changes improve results.

Key ideas

• The band basis is a volume-weighted moving average, with a lower threshold 0.618 standard-deviation units below it.
• A bullish 50- and 200-period EMA relationship filters long entries.
• Entries occur when price reaches or drops below the lower threshold, and exits follow a cross above the upper threshold.
• A fixed percentage stop loss is specified, though the document notes it may not adapt to volatility.
• The published backtest configuration includes no reported performance statistics.

Tags

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