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Bollinger Bands Mean Reversion

Buy at lower band, sell at upper band - fade extremes.

Strategy Overview​

  • Type: Mean Reversion
  • Indicators: Bollinger Bands (20, 2.0), RSI (14)
  • Risk Level: Medium
  • Assets: Single asset (BTC)

Complete Code​

package main

import (
	"github.com/backtesting-org/kronos-sdk/pkg/types/connector"
	"github.com/backtesting-org/kronos-sdk/pkg/types/kronos"
	"github.com/backtesting-org/kronos-sdk/pkg/types/strategy"
	"github.com/shopspring/decimal"
)

type BollingerMeanReversion struct {
	strategy.BaseStrategy
	k kronos.Kronos
}

func NewBollingerMR(k kronos.Kronos) strategy.Strategy {
	return &BollingerMeanReversion{k: k}
}

func (s *BollingerMeanReversion) GetSignals() ([]*strategy.Signal, error) {
	btc := s.k.Asset("BTC")

	bb, _ := s.k.Indicators().BollingerBands(btc, 20, 2.0)
	price, _ := s.k.Market().Price(btc)
	rsi, _ := s.k.Indicators().RSI(btc, 14)

	// Buy at lower band with RSI confirmation
	if price.LessThan(bb.Lower) && rsi.LessThan(decimal.NewFromInt(35)) {
		s.k.Log().Opportunity("BB-MeanReversion", "BTC",
			"Mean reversion from lower band, target middle: %s", bb.Middle)
		signal := s.k.Signal(s.GetName()).
			Buy(btc, connector.Binance, decimal.NewFromFloat(0.1)).
			Build()
		return []*strategy.Signal{signal}, nil
	}

	// Sell at upper band
	if price.GreaterThan(bb.Upper) && rsi.GreaterThan(decimal.NewFromInt(65)) {
		s.k.Log().Opportunity("BB-MeanReversion", "BTC",
			"Mean reversion from upper band, target middle: %s", bb.Middle)
		signal := s.k.Signal(s.GetName()).
			Sell(btc, connector.Binance, decimal.NewFromFloat(0.1)).
			Build()
		return []*strategy.Signal{signal}, nil
	}

	return nil, nil
}

func (s *BollingerMeanReversion) GetName() strategy.StrategyName { return "BB-MeanReversion" }
func (s *BollingerMeanReversion) GetDescription() string { return "Bollinger Bands mean reversion" }
func (s *BollingerMeanReversion) GetRiskLevel() strategy.RiskLevel { return strategy.RiskLevelMedium }
func (s *BollingerMeanReversion) GetStrategyType() strategy.StrategyType { return strategy.StrategyTypeMeanReversion }

How It Works​

  1. Calculate Bands: Get Bollinger Bands (20-period SMA ± 2 std dev)
  2. Lower Band Touch: When price < lower band and RSI < 35, buy
  3. Upper Band Touch: When price > upper band and RSI > 65, sell
  4. Target Middle: Take profit at the middle band (mean reversion)

Key Concepts​

  • Bollinger Bands: Measure volatility and identify extremes
  • Mean Reversion: Assumes price returns to average
  • RSI Confirmation: Filters false signals
  • Automatic Take Profit: Exits at middle band

Backtesting​

Run with:

kronos backtest

Expected characteristics:

  • Moderate trade frequency
  • Works best in ranging markets
  • Struggles in strong trends
  • Quick wins, defined exits

Improvements​

Consider adding:

  • Trend filter (avoid counter-trend trades)
  • Band squeeze detection (potential breakouts)
  • Dynamic take profit (not always middle)
  • Stop loss at opposite band
  • RSI - Similar momentum confirmation
  • MA Crossover - Opposite (trend following)