Range reversal (RANGE-REV)

How the setup is identified

Fades the edges of an identified range, selling the top and buying the bottom while price is contained.

Status and evidence

−$80 in choppy conditions. Overlaps VWAP-MEAN-REV, which does the same job better.

What we learned

Range fading is the correct approach in a range, and this strategy still lost $115 over seven months while being negative in five of them. The problem is that ranges are only identifiable after they have formed, and they end without notice.

It also overlapped with VWAP-MEAN-REV, which does the same job with a better reference level. Cutting the weaker of two overlapping strategies is usually a larger improvement than tuning either.