The Barking Rat Percentiles

14 ago

Percentile Reversion with Multi-Layered Smoothing
The Barking Rat Percentiles is a multi-tiered reversion strategy based on fixed percentage movements away from the mean, designed to capture price extremes through a structured, practical approach. It combines statistically derived percentile bands, RSI momentum filtering, and ATR-driven exits to identify potential turning points while managing opportunity with precision. The aim is to isolate high-quality reversal opportunities at progressively deeper extremes while avoiding noise and low-conviction setups.

At its core, the strategy measures the current market position relative to long-term percentile thresholds. When price moves significantly beyond these smoothed levels and momentum shows signs of exhaustion, staged entries are triggered. Exits are managed using independent ATR-based take profit and stop loss logic to adapt to varying volatility conditions.

🧠 Core Logic: Tiered Extremes & Structured Management
This strategy is intentionally methodical, layering multiple thresholds and validation checks before highlighting potential setups. By combining percentile-based extremes with momentum confirmation and adaptive trade management, it offers a disciplined and repeatable framework for mean reversion trading.

1. Percentile Thresholds as the Primary Framework
The script calculates the highest high and lowest low over a long lookback period of more than 1000 candles to define the overall price range. It then derives upper and lower percentile thresholds to determine extreme price levels. These thresholds are smoothed using a simple moving average to filter out short-term noise, ensuring that only statistically significant deviations from the mean are considered for potential trades.

2. Multi-Tier Entry Levels
Based on the percentile distance away from the mean, the script plots and references five discrete trigger levels beyond the primary thresholds for both long and short positions. Each tier represents progressively deeper extremes, typically 1–3% beyond the smoothed threshold, balancing the benefits of early entries with the safety of more confirmed extremes. Custom logic ensures only one signal is generated per threshold level, avoiding duplicate entries in the same zone.

3. RSI Momentum Filter
A 14-period RSI filter is applied to prevent entering trades against strong momentum. Long trades are only triggered when RSI falls below 30 (oversold), and short trades only when RSI rises above 70 (overbought). This helps align entries with potential exhaustion points, reducing the risk of entering prematurely into a strong ongoing trend.

4. ATR-Based Trade Management
For each trade sequence, the strategy will exit on the first exit condition met: either the take profit (TP) or the stop loss (SL). Because the TP uses a smaller ATR multiplier, it’s generally closer to the entry price, so most trades will hit the TP before reaching the SL. The SL is intentionally set with a larger ATR multiplier to give the trade room to develop, acting as a protective fallback rather than a frequent exit.

So in practice, you’ll usually see the TP executed for a trade, and the SL only triggers in cases where price moves further against the position than expected.

5. Position Reset Logic
Once price returns to the smoothed threshold region, all entry tiers in that direction are reset. This allows the system to prepare for new opportunities if the market revisits extreme levels, without triggering duplicate trades at the same threshold.

Why These Parameters Were Chosen
Multi-tier thresholds ensure that only meaningful extremes are acted upon, while the long-range SMA provides historical context and filters out noise. The staged entry logic per level balances the desire for early participation with the discipline of risk management. ATR-based TP and SL levels adapt to changing volatility, while the RSI filter improves timing by aligning trades with potential exhaustion points. Together, these elements create a balanced, structured, and repeatable approach to mean reversion trading.

📈 Chart Visuals: Clear & Intuitive

• Green “▲” below a candle: Potential long entry
  
• Red “▼” above a candle: Potential short entry
  
• Blue “✔️”: Exit when ATR take profit is hit
  
• Orange “✘”: Exit when ATR stop loss is hit
  
• Tier threshold lines (smoothed upper/lower bounds)

🔔Alerts: Stay Notified Without Watching
The strategy supports real-time alerts on candle close, ensuring that signals are only triggered once fully confirmed.

You must manually set up alerts within your TradingView account. Once configured, you’ll be able to set up one alert per instrument. This one alert covers all relevant signals and exits — ideal for hands-free monitoring.

⚙️Strategy report properties

• Position size: 25% equity per trade
  
• Initial capital: 10,000.00 USDT
  
• Pyramiding: 10 entries per direction
  
• Slippage: 2 ticks
  
• Commission: 0.055% per side
  
• Backtest timeframe: 1-minute
  
• Backtest instrument: SOLUSDT
  
• Backtesting range: Jul 28, 2025 — Aug 14, 2025

Note on Sample Size:
You’ll notice the report displays fewer than the ideal 100 trades in the strategy report above. This is intentional. The goal of the script is to isolate high-quality, short-term reversal opportunities while filtering out low-conviction setups. This means that the Barking Rat Percentiles strategy is ultra-selective, filtering out over 90% of market noise by enforcing multiple validation layers. The brief timeframe shown in the strategy report here illustrates its filtering logic over a short window — not its full capabilities. As a result, even on lower timeframes like the 1-minute chart, signals are deliberately sparse — each one must pass all criteria before triggering.

For a larger dataset:
Once the strategy is applied to your chart, users are encouraged to expand the lookback range or apply the strategy to other volatile pairs to view a full sample.

💡Why 25% Equity Per Trade?
While it's always best to size positions based on personal risk tolerance, we defaulted to 25% equity per trade in the backtesting data — and here’s why:

• Backtests using this sizing show manageable drawdowns even under volatile periods
  
• The strategy generates a sizeable number of trades, reducing reliance on a single outcome
  
• Combined with conservative filters, the 25% setting offers a balance between aggression and control
  
• Users are strongly encouraged to customize this to suit their risk profile.
  

🔍 What Makes This Strategy Unique?
Multi-Tier Percentile Triggers – Instead of relying on a single overbought/oversold zone, this strategy uses five distinct entry tiers per direction, allowing for staged, precision entries at progressively deeper extremes.

Long-Term Percentile Smoothing – By calculating extremes over a 1000+ candle range and smoothing them with a moving average, the strategy focuses only on statistically significant deviations.

Custom One-Signal-Per-Tier Logic – Prevents duplicate trades at the same threshold level, reducing overtrading and noise.

Dual ATR Exit System – Independent TP and SL levels adapt to volatility. TP uses a smaller ATR multiplier for realistic, achievable exits and generally executes first, while the SL has a larger ATR multiplier to provide protective breathing room if the trade moves further against the position.

Momentum-Aware Filtering – A 14-period RSI filter ensures trades are only taken when momentum is likely exhausted, avoiding entries into strong trends.

Automatic Position Reset – Once price normalizes, tiers reset, allowing for fresh entries without interference from previous trades.

14 ago

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14 ago

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