MR-02 · Mean Reversion

Bollinger Band Reversion

Classic mean reversion using Bollinger Bands. Enters long when price touches the lower band (oversold) and exits when price reverts to the middle band. Includes bandwidth filter to trade only during volatility expansion.

Mean ReversionVolatility

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At a glance

Best onRange-bound markets

Signal frequencyDaily

Typical holding periodDays

Asset classesIndex, Commodity, FX

Markets tested10

Data through2026-11-10

What the backtest shows

Beat buy-and-hold on 3 of 10 markets by annual return over 5 years.
Had a smaller maximum drawdown than buy-and-hold on 10 of 10 markets.
Best market by Sharpe ratio: DBC (Sharpe 0.81, CAGR 5.8%).
Weakest market: BTC-USD (Sharpe -0.12, CAGR -5.8%).

Equity curve

Bollinger Band Reversion Buy & hold · SPY, 2010-01-04 → 2026-11-10, growth of 1

Score and risk profile

Arena Score: 48.0SPY, 5 years

Return quality · 30%28

Drawdown control · 25%69

Consistency · 20%46

Robustness · 15%34

Significance · 10%82

Each bar is a percentile against every strategy on the same market and window (100 = best).

Time in market9%

Ulcer index3.5%

Longest drawdown573 days

Daily VaR (95%)0.00%

Probability Sharpe > 082%

Beta vs buy & hold0.26

Alpha (annual)+0.2%

Positive months17%

CAGR after 10 bp costs2.4%

Deflated Sharpe (luck-adjusted)26%

CAGR, 90% bootstrap range-1.4% to 7.6%

Max drawdown, 90% bootstrap range-20.1% to -6.3%

How it held up in sell-offs (SPY)

Period	Strategy	Buy & hold
Q4 2018 sell-off	-4.7%	-19.2%
COVID crash (Feb–Mar 2020)	-19.5%	-33.7%
2022 bear market	+5.7%	-24.5%
Market above its 200-day average (annualized) · 81%	+0.3%	+12.5%
Market below its 200-day average (annualized) · 19%	+13.8%	+19.8%

Sell-off dates follow the US stock market. Above/below the 200-day average uses the previous day's position, so there is no look-ahead.

Out-of-sample check (SPY)

Check	Value
Chosen parameters on their 3-year training windows (average Sharpe)	0.71
Same parameters in the following 6 months, when traded (Sharpe)	0.34
Default parameters over the same months (Sharpe)	0.25
Parameter re-selections / changes	28 / 14
Parameter settings with a positive Sharpe (full history)	9 of 9
Sharpe across settings: worst / median / best	0.25 / 0.31 / 0.44

Out-of-sample periods start on 2013-01-04. Training-window figures are flattered by picking the best of 9 settings; the out-of-sample figure is what the strategy actually earned. A large drop, or a result that depends on one setting, points to overfitting. How walk-forward testing works.

Results by market (5 years)

Market	CAGR	Buy & hold CAGR	Sharpe	Max drawdown	Buy & hold max DD	Volatility	Arena Score
DBCInvesco DB Commodity Index	5.8%	10.8%	0.81	-6.7%	-27.3%	7.3%	75
USOUnited States Oil Fund	8.9%	20.2%	0.74	-13.0%	-36.2%	12.7%	64
DBAInvesco DB Agriculture	2.3%	8.8%	0.50	-6.2%	-15.9%	4.9%	55
SPYSPDR S&P 500	3.1%	11.6%	0.39	-9.0%	-24.5%	8.9%	48
EURUSD=XEUR/USD	0.8%	-0.7%	0.28	-2.6%	-17.2%	3.0%	68
GLDSPDR Gold Shares	0.9%	16.4%	0.18	-8.5%	-28.3%	6.1%	36
ETH-USDEthereum	1.1%	-15.1%	0.16	-47.8%	-79.0%	25.2%	59
UNGUnited States Natural Gas	0.0%	-30.7%	0.08	-27.7%	-93.3%	16.7%	77
SLViShares Silver Trust	-1.3%	15.2%	-0.11	-20.4%	-57.8%	8.6%	21
BTC-USDBitcoin	-5.8%	2.6%	-0.12	-44.6%	-75.9%	19.1%	23

Strategy metrics use daily returns without trading costs. Buy-and-hold figures are for the same market and window. Rows are sorted by Sharpe ratio.

SPY across time windows

Window	Total return	CAGR	Sharpe	Sortino	Max DD	Win days	Trades
1 year	+5.9%	5.9%	0.78	0.31	-4.4%	7%	7
3 years	+1.5%	0.5%	0.10	0.05	-8.8%	4%	19
5 years	+16.3%	3.1%	0.39	0.19	-9.0%	5%	35
Full history	+57.1%	2.7%	0.34	0.14	-20.4%	5%	109

Rules

Entry

Buy when Close <= Lower Band and Bandwidth expanding

Exit

Exit when Close >= Middle Band
Or max holding period reached

Indicators

SMA(20)
StdDev(20)
Upper/Lower Bands
Bandwidth

Inputs

Period = 20
Num_Std = 2.0
Max_Hold = 10

Position sizing

Fixed 100% allocation

Risk controls

Stop loss at 3% below lower band
Max hold 10 days

Strategy evidence

Only available, validated bundles appear below. Missing evidence is not a passing validation result.

Evidence coverage

10 / 10 declared strategy–market pairs validated

Notes

Based on John Bollinger's 1980s indicator
Assumes ~95% of prices fall within 2 standard deviations
Best in sideways markets, underperforms in strong trends

Related strategies

COMBO-01 · SPY 5Y Sharpe 0.03Bollinger-Keltner Squeeze COMBO-04 · SPY 5Y Sharpe 0.38Trend + Mean Reversion Hybrid CS-02 · CS-UNIV 5Y Sharpe 0.97Low Volatility Rotation MR-01 · SPY 5Y Sharpe 0.77RSI Mean Reversion MR-03 · SPY 5Y Sharpe 0.25Kalman Filter Mean Reversion MR-04 · SPY 5Y Sharpe 0.24Ornstein-Uhlenbeck Mean Reversion

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Backtests are historical simulations on daily data and do not include commissions or slippage. They do not guarantee future results and are not investment advice. See the methodology for how every strategy is tested.