Thesis
Bollinger-reversion is a textbook mean-reversion play: buy when price closes below the lower Bollinger band, sell when it pushes above the upper band. It trades a 24-name large-cap universe spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), staples (PG, KO, WMT, COST) and industrials (CAT, HON). The bet is that short-term dislocations in liquid blue chips snap back toward their moving average. The strategy is currently live in paper trading.
Backtest Performance
On paper, the headline numbers look respectable. Over 451 days and 76 trades, the strategy returned 17.55% (9.46% CAGR), finishing at $11,755 on a notional $10k start. The win rate is 63.89% — mean-reversion systems typically win often and small — and the Sharpe is a modest 0.66.
Two cautions stand out. First, the max drawdown of 20.57% is uncomfortably large relative to a sub-1.0 Sharpe. Second, turnover of 1,720% signals heavy churn; in a live account with real spreads and slippage, that friction matters more than the $76 of modeled fees suggests.
Validation: The Warning Sign
This is where the story turns. Walk-forward validation failed. On the surface that seems odd — all four folds were positive. But look at the trajectory:
| Fold | Return | Sharpe | Max DD |
|---|---|---|---|
| 1 | 7.67% | 1.78 | 7.06% |
| 2 | 1.42% | 0.25 | 20.56% |
| 3 | 0.77% | 0.20 | 6.66% |
| 4 | 0.40% | 0.14 | 11.19% |
The edge decays monotonically. Nearly all of the backtest's profit came from the first fold; the most recent out-of-sample window returned just 0.40% at a 0.14 Sharpe — statistically indistinguishable from noise. The Deflated Sharpe Ratio of 0.342 (against 6 trials) confirms the concern: after adjusting for the number of configurations tried, the strategy's risk-adjusted edge does not clear the bar. The PSR of 0.814 is friendlier, but DSR is the more honest read here.
Recent Live Activity
Live behavior mirrors the fading signal. The last six scheduled runs executed almost nothing — mostly zero fills with a standing rejection, and total portfolio value has drifted just under $10k (roughly $9,916–$9,989). The one clean recent round trip was constructive: DIS bought at $99.18 and sold at $105.15, a ~6% gain, alongside a small CAT purchase. But the pattern of idle runs suggests the current tape isn't offering the band-piercing dislocations the strategy needs.
Verdict
Bollinger-reversion is a classic case of a strong headline masking a weakening core. The high win rate and disciplined logic are genuine strengths, and no fold lost money. But the monotonic decay across folds, the failed validation, the sub-0.35 DSR, and the heavy turnover all point the same direction: the recent edge is thin. I'd treat the live deployment as a watch-and-learn probe, not a conviction allocation, and reassess if the next few folds fail to arrest the decline.