Volatility-Scaled Bollinger Reversal DCA with a Fixed Cycle Budget
Summary
This article describes D-Man V3, a mean-reversion strategy that uses Bollinger Bands both to identify price extremes and to scale the spacing of dollar-cost-averaging orders with recent volatility. Signals use closed candles and require a first crossing beyond a band threshold. At cycle creation, the strategy fixes a maximum capital budget, allocates it across planned layers, and rejects the plan if market quantity or notional constraints cannot be met. Filled positions are managed together as one basket, with exits based on average entry, volatility-scaled distances, holding time, and trailing conditions.
The article emphasizes implementation controls, including order ownership, persistent cycle state, partial-fill handling, restart recovery, and regime-based backtesting. It supplies formulas, parameter examples, and proposed validation scenarios, but the excerpt provides no quantified performance evidence. The strategy remains vulnerable to persistent trends, gaps, slippage, liquidation, liquidity problems, and exchange failures; a budget cap limits planned exposure but does not make losses predictable or eliminate tail risk.
Key ideas
- Bollinger percentage identifies extreme closes, while Bollinger half-width sets volatility-adjusted DCA spacing.
- The signal uses closed candles and a crossing condition to avoid starting a cycle on every candle that remains outside a band.
- A fixed cycle budget is allocated across a finite set of order layers, subject to market constraints.
- Filled layers are treated as one basket, with exits based on the exchange-reported average position price.
- Order ownership, state recovery, and abnormal-fill handling are part of live risk management.
- The strategy can still suffer substantial losses in persistent trends or under adverse execution conditions.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.