Trading the Mean Reversion Strategy

Pullback trading is a never ending debate which is constantly argued about by traders. Numerous Strategies and systems are formed for this purpose. Because trading pullback can be very lucrative if done correctly.For this, Traders develops a lot of trading strategies and system based on pullbacks such as:​Mean Reversion Trading Strategy,ABC pattern or two legged pullback trading strategySwing trading strategyTrading reversal bars etc​In the following article , I m going to explain Mean Reversion Trading strategy using EMA . Many charts, with real setups and trade examples, are also included. These examples help explain the mean reversion Trading Strategy. I hope you find this strategy helpful for your trading. Mean reversion Trading Strategy The mean gives the average value.In trading , Mean Reversion Strategies rely technical indicators to indicate when the market is away from its mean. For Example I m using this strategy in combination with price action. Currencies to Trade This Strategy works on all currencies. You can trade it on any currencies you want Time Frames to Trade Best time frames for trading this strategy are the 1 Day and 4 Hour. The strategy works well on 1 Day and 4 Hour time frames. On higher time frames, like 1 Week and 1 Month, signals are even stronger. However, there are much fewer opportunities to trade in the same time span. Sessions to Trade If you are intraday trader than best sessions for trading this strategy are the London Session and the New York Session. There is usually good price movement at these times. But better time frame is daily and weekly. Mean reversion theory: Mean reversion theory is a well attested phenomenon that, when learned well and traded appropriately, can be a very profitable approach to the markets. Mean reversion is basically based on the theory that price does not like to move or sit away form its mean.So whenever price is at extreme or higher levels , sellers jump in to take advantage of the higher than average price. Indicators we need:EMA 10EMA 26Things to Look for :

• Gap between price and the mean
• Support or resistance levels
• Candlestick reversal bars at extreme levels

Let us Start with examples:​

​In the chart above, price opened with a large gap from the Ema's and its mean and the resistance was around 122.60 so as expected price comes back to its mean Another example to explain more:​​

​Here is another example to explain this mean reversion trading strategy:​​

So concept is so simple : "price when formed at extreme prices from the mean value, leaving a large gap between price and the mean itself. Generally these type of ‘mean reversions/corrections’ are quite aggressive and sharply comes back to its mean value." Sum Up: There is no holy grail in trading instead there are strategies that work for a while or in a specific market environment. The role of the trader is therefore twofold. First find a good trading strategy, second find the right environment for this strategy. I tried to cover the mean reversion trading strategy, but there is lot more material available on the internet which can help you a lot I would love to hear any questions, comments or suggestions, for example: What do you think about this strategy?Do you have any suggestions how to improve this strategy?Thank you for reading this article. I hope you will find the Mean Reversion Trading Strategy helpful for your trading. Happy trading everyone! :-)