Thesis & Approach
Bollinger-reversion applies a classic mean-reversion rule to a 24-stock large-cap universe spanning technology, financials, healthcare, consumer staples, and energy. Entry signals fire when price closes below the lower Bollinger band; exits trigger above the upper band. The logic is well-studied: in liquid, large-cap names, extreme moves tend to snap back. The universe — AAPL, MSFT, GOOGL, JPM, JNJ, WMT, and peers — is chosen deliberately for depth and tight spreads.
Backtest Summary
Over a 451-day backtest, the strategy produced a 17.55% total return and a 9.46% CAGR. The standout figure is the 63.89% win rate across 76 trades — nearly two out of three positions resolved in the strategy's favour. On the risk side, a 20.57% maximum drawdown is the headline number, and the Sharpe ratio of 0.66 reflects a positive but modest return stream relative to the volatility taken. Total fees were $76 (flat per-trade); FX costs were zero given the all-USD universe. Turnover ran high at 1,720%, a natural consequence of short mean-reversion holding periods.
Validation: A Flag That Matters
The strategy did not pass Headmars' automated validation gate. The fold-level breakdown explains why.
| Fold | Period | Return | Sharpe | Max DD |
|---|---|---|---|---|
| 1 | Aug 2024 – Jan 2025 | +7.67% | 1.78 | 7.06% |
| 2 | Jan 2025 – Jul 2025 | +1.42% | 0.25 | 20.56% |
| 3 | Jul 2025 – Dec 2025 | +0.77% | 0.20 | 6.66% |
| 4 | Dec 2025 – May 2026 | +0.40% | 0.14 | 11.19% |
Performance declines monotonically across all four folds. The same rules that produced a 1.78 Sharpe in Fold 1 delivered just 0.14 in Fold 4. Out-of-sample return stands at 0.4%, the Probabilistic Sharpe Ratio (PSR) is 0.814, and the Deflated Sharpe Ratio (DSR) — adjusted for six trials — falls to 0.342. None clear the platform's thresholds.
The most credible explanation is regime shift. Fold 1 coincided with elevated realized volatility and sharper intraday swings that naturally favour mean reversion. As volatility compressed in later periods, the statistical edge narrowed significantly. The DSR also serves as a reminder that even six parameter combinations is enough to overfit a simple two-parameter system.
Recent Live Activity
The past week has been quiet. Scheduled runs from June 22 through June 29 each logged zero executed trades, with two to three signals rejected per session. Portfolio value over that window ranged between roughly $9,866 and $10,100, with cash holding steady at $1,001.98.
The most recent executed trades date to early June: a clean PG round-trip (buy at $140.03, sell at $148.40 — a 5.97% gain in eight days), a GOOGL entry at $377.90, and earlier entries in WMT and COST. The current rejection streak suggests the market is not presenting the extreme band-touches the strategy needs to act.
Outlook
Bollinger-reversion has a sensible thesis and an encouraging live win rate, but fold-level deterioration is a material concern. Strategies that earn their best returns in high-volatility regimes face structural headwinds when markets trend smoothly or volatility compresses. The platform's validation gate flagged this correctly.
The strategy can remain under paper watch. The reasonable trigger for revisiting capital deployment would be forward live performance recovering toward Fold 1 levels — not a re-run of the same backtest with adjusted parameters.