Mastering the Rubber Band: Trading Mean Reversion with Bollinger & Keltner

Understanding statistical mean reversion and price extension from the 20-day simple moving average.

The Rubber Band strategy measures how tightly stretched a stock is away from its equilibrium moving average. Just like a physical rubber band, the farther price extends from mean valuation, the stronger the snap-back tension becomes.

Key Confluence Criteria

• Statistical Deviation: Daily close touches or pierces the 2.0 standard deviation lower Bollinger Band.
• RSI Oversold Condition: 14-period RSI prints below 30 or shows bullish divergence.
• Keltner Compression: Relative Volatility index (RVOL) spikes as institutional buyers defend key historical support levels.

"In swing trading, you do not predict the future; you trade the probability of mean reversion with asymmetric risk:reward."

Practice trading Rubber Band setups with $25,000 in simulated capital in The Swyngr Arena.