A personal story and other options follow...

Edgewonk Ad

Mean Reversion

A personal story...

Once a subject that fascinated me mainly because of this quote "Mean reversion is as close as we get to a known certainty in the world of Forex trading".

I spent many months on this, back-testing and more back-testing, Currency pair after Currency pair and time frame after time frame looking for a strategy to exploit this "known certainty".

I made the following observations...

  • The higher time frames were best (4 Hour and above)
  • A larger mean (Moving Average) was best
  • Waiting for a larger move (percentage wise was best)

However, the issue with any strategy, I found, was determining an appropriate Stop. This was compounded by the fact that although the mean (by default) is the obvious Target, by the time price reverted, much of the time the mean had risen to (or above) my Entry.

The other issue was that many times reversion takes much longer than expected, more often than than expected.

Perhaps this "known certainty" can be exploited, my choice, based on the above observations it is unlikely it will be me doing the exploiting.

Click HERE to download this subject as an infographic

Click HERE to download this subject as a PDF

To use this infographic on your website, copy and paste the following code…

<div style=”clear:both”><a href=”http://forexuseful.com/new/members/21812-forex-guide/trading-strategy-ideas/mean-reversion/”><img src=”http://forexuseful.com/wp-content/uploads/Mean-Reversion.png” title=”Mean Reversion” alt=”Mean Reversion” border=”0″ /></a></div> <div>Courtesy of: <a href=”http://forexuseful.com/”>Forex Useful</a></div> <p>

Up Next...

Pivot Point Trading

Continue ➜