Mean Reversion Infographic

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Mean Reversion Infographic

It can be assumed that Price will always return (revert) to the Mean (Moving average)

MEAN REVERSION CHARACTERISTICS

Price reverts to the Mean, cuts through it, and rises above it – Price then once again, reverts to the Mean, cuts through it, and…

Falls below it!

Mean Reversion applies to…

  • All Time-frames
  • All Moving averages
  • All Currency pairs (and most other instruments*)

The higher the Time-frame the longer it will take Price to extend from and revert back to the Mean (Moving average)

The longer (in value) the Moving average (Mean), the more Price will be able to extend away from the Mean and thus the longer it will take for Price to revert back to the Mean

Mean reversion applies to ALL Moving averages on ALL Time-frames for ALL Currency pairs and most other instruments*

* Stocks – If a company goes bust and the value of that Stock reduces to 0 – Mean reversion cannot occur

Mean reversion (which will always occur*) becomes more likely the further Price extends away from the Mean