Bollinger Band Mean Reversion with Deviation-State Signals

Summary

This BTC futures strategy combines a moving average, Bollinger Bands, and a percentage deviation threshold. It tracks when price has moved sufficiently far from the average, then resets that state once price returns inside the bands. Its stated entry rules go long when price is outside the upper band after the reset and short when it is outside the lower band. The published defaults use a 20-period average, bands two standard deviations wide, and a 3.5% deviation threshold.

The document explains the signal logic and suggests trend filters, volatility-based stops, and limits on trading frequency as possible refinements. Its published backtest configuration covers a short period of two-hour BTC futures data, but no performance results are reported. The presentation describes the approach as mean reversion, though the entry rules after resetting the deviation state require a band breakout; this makes the intended behavior worth verifying against an implementation. Strong trends, parameter choices, slippage, and trading costs may all affect results.

Key ideas

• A moving average and two standard deviation bands define a price channel.
• A percentage threshold marks when price has moved substantially away from its average.
• The strategy records that deviation state and clears it when price returns inside the bands.
• Its stated entries require a subsequent upper or lower band breakout for a long or short position.
• The document identifies trend conditions, parameter sensitivity, and transaction costs as risks.

Tags

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