An introduction to forex mean reversion indicator: Many traders, even those with expertise use systems to increase the probability of winning. The two topmost indicators fall into two classes: “Leading” or “Lagging”
Forex Mean Reversion Indicator Set
However, the name LEADING is inappropriately named as none of them lead with any type of reliability. If these indicators worked like holy grail then all traders would merely buy an Oversold market and Sell it when it used to be Overbought, and vice versa. Methods in keeping with Leading indicators don’t work for one easy cause – None of them lead with any type of reliability.
Lagging indications and systems are in line with them are ineffective as a result of because the identity suggests – They lag.
The Foreign exchange or Forex Mean Reversion Indicator is neither a Leading or a Lagging indicator – It’s an actual-time indicator that predicts the market in accordance with a uncanny precision. It gives a real indication of when a market is Overbought/Oversold – On ALL conditions throughout ALL time-frames.
Forex mean reversion – FACT: Prices will fluctuate from a mean (price) to different Highs and Lows and will always revert to a mean (price) at some stage in the future. Below is a list of popular definitions for Mean Reversion, including their sources:
A theory suggesting that prices tend to eventually move back towards the mean or average – Investopedia.
The essence of the concept is the assumption that both the high and low prices are temporary and that a foreign currencies price will tend to move to the average price over time – Wikipedia.
The theory that a given value will continue to return to an average value over time, despite fluctuations above and below the average value – Investor Words.
Unlike no other indicator, the Forex Mean Reversion (FMR) Indicator is a real-time indicator based on a fundamental fact. It calculates and displays a Mean (price) based on the Mean level (a Simple Moving Average) setting.
It then calculates and displays two levels either side of the Mean – These levels are based on percentage movements derived from the current Average True Range (ATR) reading.
Level 1 is a suggested Entry level (where a reversion to the mean is expected) and Level 2 is a suggested Stop level (where historically, prices rarely, if ever, extend to).
Both levels, as well as the Mean level setting, are user-defined and are adjusted the same way as settings for other Technical indicators.
Forex Mean Reversion – Trading System And Indicator:
The FMR product can be used as a trading system in its own right or as an indicator to complement existing strategies. This is why they provide:
The FMR template and
The FMR indicator
Those wishing to use the Forex Mean Reversion System simply load the template onto the charts they wish to trade and adjust the indicator to suit their trading style. Alternatively, the indicator can be added to any existing chart and again adjusted as required.
Suggested levels for selected instruments and time-frames are provided in the manual, however, the main benefit of the indicator is its flexibility. Users are able to use and adjust these levels or identify their own, for ALL instruments on ALL time-frames. We are using the forex mean reversion system even on India’s Nifty index.
2017 Update: ForexMeanReversion.com website has closed down.
Indrajit is a professional blogger and trading system developer. Amibroker expert, WordPress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.