Mean Reversion with RSI and Bollinger Bands

Purpose:
Capture price reversals when the market becomes overextended. This is a mean-reversion strategy, entering trades when the price moves outside Bollinger Bands and RSI confirms an overbought/oversold condition.

Indicators Used:

• Bollinger Bands (20, 2) – detect overextension

• RSI (14) – confirm momentum extremes

Logic:

• Buy Conditions:

  1. Price closes below the lower Bollinger Band

  2. RSI < 30

  3. No existing open positions

• Sell Conditions:

  1. Price closes above the upper Bollinger Band

  2. RSI > 70

  3. No existing open positions

Risk Management:

• Stop Loss: ATR(14) × 2

• Take Profit: 2 × Stop Loss

• Spread filter: avoid trading if spread is too wide

Notes:

• Designed for sideway or slightly trending markets.

• Ideal for short-term scalping or swing setups.