Dual Bollinger Band Mean Reversion

The Dual Bollinger Band Mean Reversion indicator provides a systematic framework for mean reversion trading by utilizing two sets of Bollinger Bands to identify high-probability reversal points and trend context.

Usage

This tool is primarily designed for scalping on lower timeframes (1-5 minutes). It identifies potential long entries when specific price action occurs relative to both a "Fast" and a "Slow" set of Bollinger Bands.

An entry signal is generated when:

1. Price closes below the lower band of the Fast Bollinger Band.
2. Price subsequently closes back above that same lower band.
3. The price must be trending or positioned above the Basis (moving average) of the Slow Bollinger Band to ensure the mean reversion is occurring within a supportive context.

When these conditions are met, the script plots a label and provides dynamic exit levels:

• Take Profit: Plotted at the upper band of the Fast Bollinger Band.
• Stop Loss: Plotted at a symmetrical distance below the entry open price based on the target distance.

The indicator includes a built-in tracking function that displays "W" (Win) or "L" (Loss) labels based on a 1:1 risk-to-reward ratio calculation to help users evaluate historical performance on their chosen asset.

Details

The script construction relies on two distinct lookback periods. The Fast Length (default 20) captures short-term volatility and price extremes, while the Slow Length (default 400) provides a broader view of the market trend. By requiring price to be above the slow basis line during a long setup, the script filters against mean reversion attempts in strong downtrends.

The exit logic is dynamic; the target level updates based on the upper fast band's position at the time of entry, while the stop level is calculated to maintain a consistent mathematical relationship with the entry price.

Settings

• Fast Length: The lookback period for the primary Bollinger Bands used for entry signals and targets.
• Slow Length: The lookback period for the secondary Bollinger Bands used for trend filtering.
• Source: The price input used for calculations (default is Close).
• StdDev Multiplier: The standard deviation multiplier that determines the width of both sets of bands.

FAQ

How do I use the Dual Bollinger Band Mean Reversion?

You can identify potential trade setups when the price dips below the fast lower band and recovers, provided it remains above the slow moving average.

What timeframes are best for this tool?

While it can be used on any timeframe, it is optimized for 1-minute and 5-minute charts for scalping strategies.

How can I access this script?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.