(by default) is the obvious Target, by the time price reverted, much of the time the mean had risen to (or above) my Entry. Mean, reversion is suitable for any currency pair, any timeframe and any trading style including scalping and day trading. The, mean, reversion strategy caters better to long-term trading as there is a clearer picture of an average over a longer period. At this point you may be asking yourself, but isnt this similar to dynamic support and resistance? It applies to all things in life and trading is no exception.
Summary I hope this lesson has presented you with a new way to use moving averages as a mean reversion tool. Although the concept is easy to understand, Im certain that what youre about to learn will change the way you view the markets. Moving Average Basics, before we get into the details of mean reversion, lets first cover the basics of moving averages. Which brings me to the last point in todays lesson. . Heres an example of a runaway market on the daily time frame. Leave your feedback below. This is how we can use the 10 and 20 exponential moving averages to help find areas to look for buying and selling opportunities. Dont worry, the chart above isnt nearly as confusing as it might seem at first. Runaway Markets The last exception can be defined as runaway markets. This is similar to what market makers do in establishing a mid and standing ready to buy below that price and sell above. The answer to this question depends on three variables. In other words, buying too high or selling too low.
A personal story and other options follow.
Once a subject that fascinated me mainly because of this" Mean reversion is as close as we get to a known certainty in the world of Forex trading.
Mean Reversion : A Guide to Market Timing.
It applies to all things in life and trading is no exception.
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