(binned per thread starter’s request) reversionX: A Rule-Based

Welcome, Traders
Let’s cut through the noise for a second. If you’re here looking for a 90% win-rate system that catches 10R moves with 3-pip stops… this isn’t that. If you're trying to buy bottoms and sell tops with sniper precision… this isn't that either. But if you're tired of emotional trades, chasing candles, and relying on hope instead of rules, then you're in the right place.

reversionX is a realistic, rule-based mean reversion strategy that helps you consistently capitalize on overextended price moves — without the fluff, hype, or wishful thinking.

The Big Idea: Price Tends to Revert to the Mean

1. This is the foundation of reversionX — and it’s not just theory. It’s one of the most well-documented statistical facts in financial markets.
2. Academic studies dating back to the 1980s have shown that in the short to medium term, asset prices exhibit mean-reverting behavior, especially after sharp moves away from average price levels.
3. According to research by Lo and MacKinlay (1988), stock returns show significant negative autocorrelation at short time lags, indicating a tendency to “bounce back” after a move.
4. Bollinger Bands, the primary tool here, are built on the statistical property of standard deviation — they show the expected range that ~95% of price action stays within. Price closing outside signals an overextension or an anomaly, making a reversion highly probable.

Simply put:
When price moves significantly away from its mean (average), it tends to pull back or “revert” rather than continue indefinitely in that direction. That doesn’t mean price won’t trend, but statistically, many big moves are followed by corrections or consolidations. This concept has been validated across multiple markets — Forex, stocks, commodities, and crypto — and forms the backbone of countless trading strategies used by professional traders.


Quick Strategy Snapshot

Market - Forex, indices, crypto — any volatile asset
Timeframes - 15-minute recommended (works on 5M–1H)
Platform - TradingView or MT4/MT5
Style - Mean Reversion
Risk: Reward - 1:2 target average
Win Rate - 55–60% based on backtesting


Core Indicators Used (Default Settings)

1. Bollinger Bands (20, 2)
2. RSI (14)
3. StochRSI (14)
   You can use the custom “reversionX” TradingView indicator by reversionX(ME), which highlights entry signals when the above three conditions align. (Indicator can be found here - https://in.tradingview.com/script/0q2LcYLu-reversionX/)
4. MACD (12, 26, 9)
5. TTM Squeeze (any reliable version – I use "TTM Squeeze Pro" by Beardy_Fred on TradingView).

MT4 indicators and template can be found here - https://www.forexfactory.com/thread/post/15282184#post15282184

Buy Setup (Long Trade)
A buy signal occurs when the market is oversold and shows signs of a momentum shift.

Entry Criteria:

1. Candle closes below the lower Bollinger Band
2. The next candle closes back inside the bands
3. StochRSI < 20 (oversold)
4. RSI > 25 (avoid catching falling knives)
5. MACD histogram decreasing (bearish momentum weakening)- wait for two light red bars for conservative entry
6. TTM Squeeze filter:
   1. No green dot with red histogram
   2. Wait for 2 yellow bars for added confirmation, especially followed by a green dot with a red histogram
   3. If you see other dots with red bars (still indicating bearish momentum), be cautious. Check if MACD is steadily losing bullish momentum, or consider waiting for 1–2 yellow bars to confirm before entering.

   
   

Sell Setup (Short Trade)
A short signal forms when the price is overbought and begins rolling over.

Entry Criteria:

1. Candle closes above the upper Bollinger Band
2. The next candle closes back inside
3. StochRSI > 80 (overbought)
4. RSI < 75 (momentum fading)
5. MACD histogram decreasing (bullish pressure weakening) - wait for two light green bars for conservative entry
6. TTM Squeeze filter:
   1. No green dot with aqua histogram
   2. Wait for 2 blue bars for confirmation, especially followed by a green dot with an aqua histogram
   3. If you see other dots with aqua bars (still indicating bullish momentum), be cautious. Check if MACD is steadily losing bullish momentum, or consider waiting for 1–2 blue bars to confirm before entering.

   
   

Bonus Confluences:

1. Divergences
2. Engulfing candles with volume, pin bars, and Harami candles
3. Price near previous session high/ lows or key resistance and supply zones.

Trade Management
Stop Loss:

1. Long: 2–3 pips below the recent low
2. Short: 2–3 pips above the recent high
   

Take Profit Options:

1. Fixed 2R
2. Midline of Bollinger Bands (mean reversion target)
3. Opposite Band (if volatility is high and structure supports it).

When to Stay Out

1. If the trade confirmation occurs after 3-4 candles from the initial signal, be cautious of the entry, or better, skip the trade.
2. If the price has already moved too much by the time of confirmation (for example price has already crossed the baseline) its better to skip the trade.
3. Major news events
4. Trading near session opens/closes (especially London or NY)
5. Previous Day High, Close, Open, Low(Just be prepared for price reaction).

Final Thoughts

1. reversionX isn’t revolutionary — but it is reliable. It’s not built to impress… It’s built to work.
2. The goal is consistency, not perfection. When followed with discipline, this strategy can be a powerful tool for any trader looking to trade clean, controlled setups.
3. Backtest it
   Demo it
   Tweak it to fit your personality
4. And when you're ready, trade it live with confidence.

And if you’ve got questions, insights, or results, post them! I’d love to hear how reversionX works in your hands.

Happy trading!!!!

PS - Important posts to look at

https://www.forexfactory.com/thread/post/15271265#post15271265
reversionX: A Rule-Based Strategy | Page 14 | Forex Factory (https://www.forexfactory.com/thread/post/15273856#post15273856)
https://www.forexfactory.com/thread/post/15256019#post15256019
https://www.forexfactory.com/thread/post/15270126#post15270126 (https://www.forexfactory.com/thread/post/15256019#post15256019)
reversionX: A Rule-Based Strategy | Page 3 | Forex Factory (https://www.forexfactory.com/thread/post/15250617#post15250617)
reversionX: A Rule-Based Strategy | Page 4 | Forex Factory (https://www.forexfactory.com/thread/post/15252789#post15252789)
reversionX: A Rule-Based Strategy | Page 4 | Forex Factory (https://www.forexfactory.com/thread/post/15252951#post15252951)
https://www.forexfactory.com/thread/post/15254087#post15254087 (https://www.forexfactory.com/thread/post/15252951#post15252951)

Buy Setup on gold today

2 setups first one is more aggressive and the second one is more conservative

Hello,

The "reversionX" indicator isnt available for some reason? When searching for it, TV says "publication has ghosted"

I can't find the indicator reversionX

Hi, I published the script yesterday, but I just realized that it violated the community guidelines. However, you can still access the script through the link below
https://in.tradingview.com/script/0q2LcYLu-reversionX/

Please try accessing this link
https://in.tradingview.com/script/0q2LcYLu-reversionX/

Thank you very much! I was able to add it to my TradingView template.
One question, the arrows indicate the time when Stoch > 80, and RSI is < 75? In an example of sales

Could you give a tutorial of the indicators on your chart please? All the required settings to make it easy to build a chart template the same.

A tip, use the dropdown to display the indicators on your chart as part of the tutorial.

A tip, use the Watermark so that we can see the time frame of your posted chart so that we may compare signals easily, and confirm the set up is correct.

Here is an example, Thanks.

What are the parameters for StochRSI and TTM?

No specific settings, just the default ones.

Correct, but you can change the settings though...

Sure, will add the watermark in future posts, as for the settings and indicators I have mentioned above, and the settings are all default...

Another trade,
First trade - Break even or 1R, depending on your take profit style
Second trade- Hit 2R

I changed only the StochRSI value to 80-20 which defaulted to 90-10.

Another setup took some time from the initial signal, but you can see that the MACD is losing momentum along with the TTM squeeze. You can skip these kinds of setups if you're more conservative.

Another proper setup..

Another perfect setup on Natgas....

Hi rishee,
First of all, thank you very much for sharing your strategy with the community.
Much appreciated!

I was always interested in the concept of mean reversion, but couldn't put it into practice in a way that would be both simple and logical.
Your system looks logical, and I believe that with some practice can be relatively simple to use.

I remember when looking into squeeze momentum indicator (lazyBear), which looks similar to TTM Squeeze Pro,
I was expecting that good setups would be when momentum increases, i.e. good trend.
However, the best setups were always the ones with decreasing momentum. I think I now understand why...

I have a question:
In post 14, you give the example of - First trade - Break even or 1R, depending on your take profit style.
Do you usually trail your SL (in this case, to BE or 1R)? Or mostly, go for all or nothing?

Thanks for the detailed remarks. Regarding taking profit, I usually trail to breakeven after reaching 1R. I don’t take partials — it's either breakeven (BE), take profit (TP), or stop loss (SL). However, if the price hits the opposite Bollinger Band before reaching 2R, then I agree it’s better to trail the stop more aggressively or even close the trade entirely.

Regarding the TTM Squeeze, there are several ways to use it. Most traders typically use it for trend-following — they enter trades as the squeeze fires. However, since our strategy is more focused on mean reversion, we tend to enter after the squeeze has already fired. With experience, you'll notice that the squeeze can help capture larger take profits, but to keep things simple and consistent, I recommend sticking to a 2R target.

A great example is the one I shared above. You can see that bullish momentum started to fade, and the TTM Squeeze fired to the downside. In this case, a 5R target was easily achievable. Of course, not every trade will be this clear. The more you practice, the better you'll get at reading the market. That said, staying objective is key — it’s far better than constantly second-guessing and relying too much on subjective judgment.