Percent B Mean Reversion

Entry Logic

• Long Entry: %B indicator goes below 0.
• Short Entry: %B indicator goes above 1.
• Confirmation: %B crosses back inside the 0-1 range.
• Timeframe: 5-minute.
• Location: Outside the Bollinger Bands.
• Market Condition: Ranging.

Exit Logic

• Profit Target: %B reaches 0.5 (the 20 MA).
• Scaling Out: No.
• Trailing Stop: No.
• Signal Failure: Exit if %B makes a new extreme.
• Opposite Signal: Exit on an opposite signal.
• Time Expiration: 5-7 bars.
• Momentum Loss: Exit if price stalls.

Stop Loss Structure

• Hard Stop: 1 ATR from the entry price.
• Soft Stop: If %B fails to move towards 0.5.
• Max Dollar Loss: $400.
• Max Percent Loss: 0.8%.
• Structural Stop: Beyond the high/low of the move outside the bands.

Risk Management Framework

• Risk Per Trade: 0.5%.
• Daily Limit: 3 losses.
• Weekly Limit: 3%.
• Max Drawdown: 10%.
• R:R Requirement: 1.5:1.

Position Sizing Model

• Sizing Approach: Fixed fractional.
• Volatility Adjustment: No.
• Conviction Sizing: No.
• Scaling In: No.
• Scaling Out: No.

Trade Filtering

• Market Conditions: Avoid strong trends.
• Setups: Requires a clear move outside the Bollinger Bands.
• Instruments: Liquid stocks and ETFs.
• Time Restrictions: Avoid the open.
• Chop/News Avoidance: Yes.

Context Framework

• Trend Direction: Neutral.
• VWAP Relationship: Fade moves away from VWAP.
• MA Relationship: Price is extended from the 20 MA.
• Range Location: At the extremes of the daily range.
• Higher TF Alignment: Higher timeframe should be in a range.

Trade Management Rules

• Breakeven: After 1R.
• Scale Out: No.
• Add Size: No.
• Fast vs Slow Moves: Works best on sharp, v-shaped reversals.

Time Rules

• Optimal Window: Mid-day.
• Times to Avoid: Open and close.
• Session Notes: A simple but effective way to trade Bollinger Bands.

Setup Classification

• A+ Setup: %B goes below -0.1 or above 1.1, showing a significant overshoot.
• A Setup: %B goes below 0 or above 1.
• B Setup: %B touches 0 or 1 and immediately reverses.
• C Setup: %B grinds along the 0 or 1 line.

Market Selection Criteria

• Instruments: SPY, QQQ, large-cap stocks.
• Volume: High.
• Volatility: Moderate.

Statistical Edge Metrics

• Win Rate: 60%.
• Avg Win: 1.5R.
• Avg Loss: 1R.
• Profit Factor: 1.8.
• Expectancy: +0.2R.

Failure Conditions

• Market Conditions: Strong trends where the price walks the bands.
• Specific Scenarios: A breakout from a major consolidation.

Psychological Rules

• Discipline: Wait for the %B to cross back inside the bands before entering.

Advanced Components

• Regime Detection: Use ADX to filter for ranging markets.
• Filters: Look for divergence on another oscillator.
• Correlation: Be aware of the market's overall direction.
• MTF Alignment: Check the 15-min and 60-min charts for context.

Location

• Strongest: In established, sideways markets.
• Weakest: In strong, directional markets.