Mean reversion is based on the assumption that price will always return (revert) to a mean (Moving Average) Here's what it means and how to trade it... This subject and many others are covered in more detail in the FREE Forex Guide available at Forex Useful - http://forexuseful.com/new/members/21812-forex-guide/

1. Mean Reversion
Mean reversion is based on the
assumption that price will always
return (revert) to a mean (Moving Average)
Here's what it means and how to trade it...

2. 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 Characteristics

3. 10 MA
30 MA
50 MA
Price
• All Currency pairs
• All time frames
• All Moving Averages (MAs)
Mean Reversion Applies To...

4. 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 mean10 MA
30 MA
50 MA
Price
The higher the time frame the longer it will
take price to extend from and revert back
to the mean (Moving average)
A Note On Time Frames

5. Produced by
Mean Reversion is as close as we get to a known
certainty in the world of Forex trading
Mean Reversion