The Thesis
Bollinger-reversion is about as classic as systematic trading gets: buy when price closes below the lower Bollinger band, sell when it pushes above the upper band. It bets that price extremes are temporary and that a snap back to the mean is the base case. The strategy trades a 24-name universe of large-cap US equities — mega-cap tech (AAPL, MSFT, NVDA), payments (V, MA), staples (PG, KO, COST), and cyclicals (CAT, XOM) — so it leans on broad, liquid names rather than anything exotic.
Backtest Scorecard
Over 451 days the strategy returned 17.55%, ending at $11,755 on a $10k book — a 9.46% CAGR. The headline strengths are real: a 63.89% win rate across 76 trades and all-positive fold returns. But the quality metrics are more sober. The Sharpe of 0.66 is mediocre for a strategy carrying a 20.57% max drawdown, and turnover of 1,720% means the book churns roughly seventeen times over the test — the mean-reversion logic fires often, and fees ($76 total) quietly compound against thin per-trade edges.
Where It Breaks: Validation
Here's the uncomfortable part — validation failed. Walk-forward across four folds tells a decay story:
| Fold | Window | Return | Sharpe |
|---|---|---|---|
| 1 | 2024-08 → 2025-01 | 7.67% | 1.78 |
| 2 | 2025-01 → 2025-07 | 1.42% | 0.25 |
| 3 | 2025-07 → 2025-12 | 0.77% | 0.20 |
| 4 | 2025-12 → 2026-05 | 0.40% | 0.14 |
Every fold is technically green, but the edge bleeds out monotonically. The most recent out-of-sample window earns just 0.40% with a 0.14 Sharpe — statistically indistinguishable from flat. The Deflated Sharpe Ratio of 0.342, computed across 6 trials, confirms the concern: once you adjust for selection, the risk-adjusted signal is weak. A PSR of 0.814 is the one bright spot, but it isn't enough to pass the gate.
Recent Activity
Live behavior mirrors the fading backtest. The last week of scheduled runs mostly reads "0 executed, 1 rejected" — the entry conditions rarely trigger, and when they do, position sizing or cash limits often block them. Total equity has drifted around $10,000, essentially flat. The exception was 2026-08-07, which round-tripped a DIS position (bought 25 shares at $99.18 in June, sold at $105.15) and opened a single CAT share at $843.72. That DIS trade is the thesis working as designed; the rest of the tape is patience.
Verdict
Bollinger-reversion is a legitimate but tired idea. The high win rate and all-positive folds show the mechanism isn't broken — it genuinely catches oversold bounces. But the out-of-sample decay, deflated Sharpe, and failed validation say the edge is thin and shrinking, likely arbitraged down in liquid large-caps. It's a reasonable paper-trading benchmark, not something to size up. I'd want to see wider bands, a volatility or trend filter to avoid buying into genuine breakdowns, or a tighter universe before trusting fresh capital to it.