Bollinger Band Mean Reversion with MACD Confirmation and ATR Exits

Summary

This strategy seeks reversals after price moves outside a Bollinger Band, using MACD as a directional filter and ATR to set exits. In the stated rules, a long entry occurs when price crosses back above the lower band while MACD is above its signal line; a short entry occurs when price crosses back below the upper band while MACD is below its signal line. The parameters list a 20-period band with a multiplier of 2, standard MACD settings, and a 14-period ATR with a 1.5 multiplier. Stops use one ATR multiple and targets use twice that distance.

The document describes the indicator combination as a way to identify deviations, confirm momentum, and scale exit distances with volatility. It cautions that mean reversion may fail during persistent trends, volatile markets can trigger repeated stops, and extensive tuning can overfit. Backtest settings specify BTC/USDT Binance futures on a three-hour interval from November to December 2024, but no performance statistics are given. The written description says signals occur on band breaks, while the supplied rules use cross-backs through the bands; this distinction matters when interpreting or reproducing the setup.

Key ideas

• The long setup crosses back above the lower Bollinger Band with MACD above its signal line.
• The short setup crosses back below the upper band with MACD below its signal line.
• ATR-based exits use a stop distance of one multiplier and a target distance twice as large.
• The document warns that mean reversion can fail in trending markets and that parameter tuning may overfit.
• The supplied BTC/USDT futures backtest settings include no reported performance results, and the prose differs from the coded entry rules.

Tags

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