Bollinger Band Mean Reversion with a Percentage Profit Target

Summary

This strategy uses a simple moving average and standard deviation to form Bollinger Bands, then takes contrarian entries around band crossings. A long signal occurs when the prior close crosses above the lower band on a bearish candle; a short signal occurs when it crosses below the upper band on a bullish candle. Each entry receives a profit target set at 1% from the entry price. The document also describes plotting the bands and signals and gives a BTC/USDT futures backtest configuration covering April 2024, but it reports no performance results.

The approach assumes prices tend to return toward the average after moving away from it. The document notes that persistent trends can make these contrarian positions suffer deep retracements, while repeated signals in volatile or ranging conditions can increase trading costs. Band length and multiplier affect behavior, and the suggested trend filters or volatility-based exit adjustments are proposed improvements, not evaluated evidence. The strategy description calls the target dynamic, though its stated rule is a fixed percentage from entry.

Key ideas

• The strategy derives upper and lower bands from a moving average and standard deviation.
• It enters long after a lower-band crossing on a bearish candle and short after an upper-band crossing on a bullish candle.
• Positions use a 1% profit target measured from entry.
• Contrarian band signals can struggle during persistent trends and can incur costs from frequent trading.

Tags

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