Mean reversion strategies

General
1

Mean reversion is supposed to work in all market trends, does it actually? Any strategies that are good. Let’s backtest and check strategies .

2

How can you do mean reversion in trading, that is more like an investing concept? Are you talking about shorting? The CMP will revert to mean and your trade will be profitable.

1 Like
3

Mean Reversion is mainly used to execute strategies mainly based on Non Directional Movements in markets.
One Example is Delta Neutral Strategies using mean reversion method to predict Probablity of Profit even before the trades are being taken.

Check - https://divyankm.github.io/Stock-Exchange-Data-Analysis/option_strategy.html

2 Likes
4

Yes, I meant shorting or buying when the price has diverted from the mean. I wanted to know what specific indicators can be of help to catch such price movement

5

Thanks, Bro will go through this for sure.

6

You can refer to the below blog. The blog has the explanation of a Mean reversion strategy based on the Stochastic Oscillator-
Understanding the Stochastic Oscillator and creating a mean-reversion strategy in Streak - Streak Tech

Additionally, you can also explore the Streaks discover strategy section. Our team has uploaded a lot of strategies for the users for educational purposes that you can refer to. There is a whole section dedicated to Mean reversion strategies. Refer to this- Dashboard - Streak Help

7

I don’t know about trading but in investing I think people check for peak margins, capacity utilization, competitors’ performance, sector performance, PE, management guidance etc and see how long the profits and valuations are sustainable, if it is short term, then price will revert to mean.