Bollinger Mean Reversion

Bollinger Mean Reversion is a contrarian, mean-reversion strategy for range-bound markets. It buys when price has been pushed below the lower Bollinger Band and RSI confirms the move is oversold, betting on a snap-back toward the average, and exits when price reverts to the middle band (the moving average itself). It is the band-based cousin of RSI Mean-Reversion: both bet against a stretched move, but this one frames "stretched" in terms of standard deviations from the mean rather than RSI alone.

It is an easy, range-bound, 1H–Daily strategy.

How it trades

Bollinger Bands are a moving average with volatility envelopes: the middle band is an SMA, and the upper/lower bands sit a number of standard deviations above/below it.

Buy (oversold below the lower band):

Close < LOWERBOLLINGER(20, 2) AND RSI(14) < 30

Sell (reverted to the mean):

Close > MIDDLEBOLLINGER(20, 2)

Requiring both a band break and an oversold RSI is what keeps this a mean-reversion entry rather than a falling-knife catch: price is statistically stretched (below 2σ) and momentum agrees it has sold off hard.

When it works best

High win rate in sideways, range-bound markets, where price oscillates around a stable mean and reliably reverts after touching a band. Its weakness is strong trends: in a sustained downtrend price can ride the lower band for a long time, so "below the lower band and oversold" keeps firing while price keeps falling — the reversion never comes, and each dip-buy is early. The RSI filter reduces but does not eliminate this.