Mean Reversion + Bollinger + RSI Triple Filter

Entry Logic

• Long entry: Price touches the lower Bollinger Band, and the RSI is below 30. Entry on the first green candle close inside the bands.
• Short entry: Price touches the upper Bollinger Band, and the RSI is above 70. Entry on the first red candle close inside the bands.
• Confirmation: Divergence between price and RSI.
• Timeframe: 1-hour chart.
• Location: At the outer Bollinger Bands.
• Market Condition: Range-bound market.

Exit Logic

• Profit Target: The opposite Bollinger Band or the 20-period SMA.
• Scaling Out: Not recommended.
• Trailing Stop: Not recommended.
• Signal Failure: Exit if price closes outside the Bollinger Bands again.
• Opposite Signal: Exit on a valid opposite signal.
• Time Expiration: Exit if the trade is not profitable within 8 hours.
• Momentum Loss: Not applicable.

Stop Loss Structure

• Hard Stop: A fixed 1R stop loss.
• Soft Stop: A close outside the Bollinger Bands again.
• Max Dollar Loss: $100 per trade.
• Max Percent Loss: 0.5% of account.
• Structural Stop: Not applicable.

Risk Management Framework

• Risk Per Trade: 0.5% of account.
• Daily Limit: 4 losing trades.
• Weekly Limit: 6% drawdown.
• Max Drawdown: 12%.
• R:R Requirement: Minimum 1.5:1.

Position Sizing Model

• Sizing Approach: Fixed fractional, 0.5% of account at risk.
• Volatility Adjustment: Not needed due to the nature of the strategy.
• Conviction Sizing: Not recommended.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions: Avoid trending markets.
• Setups: Only take setups with clear RSI divergence.
• Instruments: Any liquid stock or ETF.
• Time Restrictions: No trading in the first 30 minutes of the session.
• Chop/News Avoidance: Avoid trading around major news events.

Context Framework

• Trend Direction: Not applicable.
• VWAP Relationship: Not applicable.
• MA Relationship: Price should be oscillating around the 200 SMA on the daily chart.
• Range Location: At the edges of the range.
• Higher TF Alignment: The daily chart should show a clear range.

Trade Management Rules

• Breakeven: Not recommended.
• Scale Out: Not recommended.
• Add Size: Not recommended.
• Fast vs Slow Moves: Take profits at the target.

Time Rules

• Optimal Window: Any time during the session.
• Times to Avoid: First 30 minutes of the session.
• Session Notes: Works well in all sessions.

Setup Classification

• A+ Setup: Perfect touch of the Bollinger Band, clear RSI divergence, and a range-bound daily chart.
• A Setup: Good touch of the Bollinger Band, some RSI divergence.
• B Setup: Touch of the Bollinger Band but no RSI divergence.
• C Setup: No clear setup.

Market Selection Criteria

• Instruments: SPY, QQQ, and other range-bound stocks.
• Volume: Minimum 1 million shares traded daily.
• Volatility: Low to moderate volatility is best.

Statistical Edge Metrics

• Win Rate: 65%.
• Avg Win: 1.5R.
• Avg Loss: 1R.
• Profit Factor: 1.95.
• Expectancy: 0.325R per trade.

Failure Conditions

• Market Conditions: Fails in strong trending markets.
• Specific Scenarios: Fails when a stock breaks out of its range.

Psychological Rules

• Mental Discipline: Must be able to take small profits and not get greedy.

Advanced Components

• Regime Detection: Use the ADX indicator to determine if the market is trending or ranging.
• Filters: Avoid trades if the ADX is above 25.
• Correlation: Avoid taking trades on highly correlated instruments.
• MTF Alignment: Daily and 4-hour charts should be range-bound.

Location

• Strongest: In a clear, range-bound market.
• Weakest: In a strong, trending market.