Mean Reversion Trading with DEMA Envelope Bands

Summary

This strategy uses a moving average as a reference price and places percentage bands above and below it. It supports several average types, including DEMA, EMA, RMA, and SMA, and lets the trader choose the average window, band spacing, and number of bands. The published defaults use DEMA and permit long orders while short orders are disabled.

The rules place limit entries at successive bands: lower bands for longs and upper bands for shorts. Each additional band can add another position, with order quantity scaled by equity and the selected band count. The strategy exits open positions at the moving average, seeking to profit when price returns toward its reference level. The document gives a BTC/USDT futures backtest configuration but reports no performance results. Persistent trends can move price away from the average and expose layered positions to losses; the source describes no explicit stop loss. Band spacing and average length therefore require evaluation, including trading costs and risk controls.

Key ideas

• The strategy places percentage envelopes around a selected moving average, with DEMA among the available choices.
• It stages limit entries at successive bands, buying below the average and optionally shorting above it.
• Open positions exit at the moving average as price returns toward the reference level.
• Layering positions can increase exposure when a move continues instead of reverting.
• The document provides a BTC/USDT futures backtest setup but no reported performance evidence.

Tags

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