The thesis
Bollinger-reversion is a classic mean-reversion play: buy names that have pierced the lower Bollinger band, sell those that punch through the upper band. It runs on a 24-name large-cap universe spanning tech, financials, healthcare, staples and energy — AAPL and NVDA sit alongside JNJ, KO, XOM and DIS. The premise is simple and well-documented: price stretches away from its moving average tend to snap back.
What the backtest says
The full-sample numbers look inviting. Over 451 days the strategy returned 17.55% (9.46% CAGR), finishing at $11,755 on a $10,000 base with a 63.89% win rate across 76 trades. That hit rate is the strategy's calling card — reversion setups are supposed to win often and small.
The caveats are just as loud. A Sharpe of 0.66 is mediocre for the return on offer, the max drawdown of 20.57% is uncomfortably deep, and turnover of 1,721% means the book churns roughly seventeen times over. At $1 a trade the fee drag is trivial here, but that much churn is fragile to slippage in the real world.
Why validation failed
This is where the story turns. Walk-forward validation ran four folds, and all four were positive — a genuine point in the strategy's favour. But the trend inside those folds is unmistakable decay:
| Fold | Return | Sharpe | Max DD |
|---|---|---|---|
| 1 | 7.67% | 1.78 | 7.1% |
| 2 | 1.42% | 0.25 | 20.6% |
| 3 | 0.77% | 0.20 | 6.7% |
| 4 | 0.40% | 0.14 | 11.2% |
The edge front-loads almost entirely into the first window. Out-of-sample return lands at just 0.40% with a Sharpe of 0.14 — effectively flat. The deflated Sharpe ratio of 0.342, adjusted for six trials, undercuts the more flattering 0.814 probabilistic Sharpe. The gate's verdict: not passed. That is the right call. A strategy whose edge evaporates as it approaches the present is a strategy that was fit to the past.
Live activity: quietly stuck
The live sleeve reflects this. The last executed trades were back in late May and early June — buys in DIS, GOOGL, PG, WMT and COST, plus one PG sell. Since then, every scheduled run from July 24 through July 31 reports the same pattern: zero executed, one or two rejected. Cash has been pinned at $1,001.98 and total equity has drifted between roughly $9,468 and $9,872 — under the $10,000 line. The strategy is holding, not trading, and its candidates keep getting turned away at the risk gate.
The verdict
Bollinger-reversion is honest about what it is: a high-win-rate reversion engine with a real but aging edge. The strengths — consistent hit rate, four positive folds — are worth keeping on the bench. The risks — front-loaded returns, a deep drawdown, and a live book that no longer clears its own filters — are why it stays on the watchlist rather than the capital allocation list. Watch for a fresh fold that reverses the decay before granting it more rope.