Regime-Filtered Mean Reversion Alpha

Family: pullback · Regime: trending · Complexity: medium · Asset classes: FX, Equities, Commodities · Timeframes: M15, D1

Thesis

Market participants often overreact to short-term intraday noise, causing price to deviate from the primary daily trend. By entering at Bollinger Band extremes on the M15 timeframe only when the D1 regime and Gann-based momentum are aligned, we exploit the high probability of price returning to the primary trend direction after a temporary 'washout' of weak hands.

Components

• D1 Bollinger Bands (Period 90) on M15 (Forward Shifted) (regime) — Establishes the macro volatility regime and filters out counter-trend trades against the daily 90-period cycle.
• HiLo Activator (Gann Style) (direction) — Determines the immediate trend bias to align entries with intraday momentum.
• Bollinger Bands (entry) — Identifies mean-reversion entry points (lower band touches) within the established trend.
• Donchian Channels (exit) — Provides a trailing exit mechanism based on market structure breakouts.
• Williams Fractals (risk) — Defines hard stop-loss levels based on local price pivots (swing highs/lows).
• Stochastic Oscillator (confirmation) — Confirms momentum recovery from oversold/overbought levels before entering.

Known failure conditions

• Price remains pinned to the D1 Bollinger Band edge for extended periods without retracement.
• Persistent low-volatility environment where Donchian exits are hit before targets due to noise.
• The lag in Fractal confirmation (2 bars) causes stop-losses to be too wide for the M15 timeframe.

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