Fractal Bands for Mean-Reversion Entries and Exits

Summary

Fractal Bands adapt a Bollinger Band style envelope around a fractally modified moving average. The indicator estimates fractal dimension from recent price changes, derives a Hurst-based adjustment to the moving-average speed, and scales the bands using recent deviations and an alpha parameter. The document lists default settings for the fractal period, baseline speed, and alpha, and includes an implementation translated from another trading platform.

The described strategy buys after price rebounds from the lower band and crosses the adjusted average, placing a stop near the band touch and targeting the opposite band. The short setup mirrors those rules. The author reports using the approach on EUR/USD at a five-minute interval and notes that other instruments and timeframes may require different settings; trailing stops are also suggested. The document offers no performance statistics or systematic validation, so the example should not be treated as evidence of profitability. The indicator and entry rules may behave differently across market regimes.

Key ideas

• The bands use a fractal-dimension estimate to adjust a moving average and its surrounding envelope.
• A lower-band rebound followed by a cross above the adjusted average is the proposed long entry.
• The short setup mirrors the long rule, with a stop near the touched band and a target at the opposite band.
• The stated example uses EUR/USD on a five-minute chart, and other settings may be needed elsewhere.
• The document provides no quantified performance results or systematic testing evidence.

Tags

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