I’m currently backtesting a mean reversion strategy using Bollinger Bands, and it got me thinking about the ubiquity of the standard (20, 2) settings.
I understand the theoretical basis: a 20-day SMA captures the intermediate trend, and +/- 2 standard deviations theoretically encompasses ~95% of price action (assuming a normal distribution, which I know financial returns often aren't).
My question is: Has there been any rigorous literature or community consensus on whether these specific integers hold any edge across modern asset classes? Or are they simply "good enough" heuristics that stuck because they were easy to calculate in the pre-HFT era?
When you optimize for these parameters:
Do you find that the "optimal" window/std dev drifts significantly for different assets (e.g., Crypto vs. Forex)?
Do you treat (20, 2) as a rigid baseline to avoid overfitting, or do you aggressively optimize these parameters (e.g., using Walk-Forward Analysis)?
I'm wary of curve-fitting my strategy by tweaking these to (18, 2.1) just to look good on a backtest. Curious to hear your philosophy on parameter optimization vs. sticking to the "sacred" defaults.