Simple Mean Reversion

AO, you have shared plenty of extremely valuable information and ideas around the concept of mean reversion.
Many of us sincerely appreciate your contributions and sharing of information. We look forward to more details regarding your thinking around this concept to grow our knowledge within this area.

For me, the concept of "mean" is a reference point. This reference point could come in many forms. It could be measured by simple moving averages, ATR, or even using various forms of custom indicators.

These 3 factors have kept me grounded when it comes to creating a mean reverting portfolio:

1) Diversification
2) Position sizing
3) Trade management

Entry and exit conditions would form part of the equation of a mean reverting strategy, and could range stretch from intraday, weekly to monthly in terms of time horizon. This is not to discount the fact that intraday closures are not optimal - I just couldn't replicate better results with a day-end close.

I couldn't stress more about the importance of diversification for pure mean reverting portfolios because of the fact that you need to spread your risk out across as many currency pairs as possible, and it's not always a bed of roses if you trade just one single currency pair.

View the attachments for some examples for GU and AU. I may spend more time elaborating and I am keen to hear more from AO about his current methodology.

Time to hit the bed, it's been a long day..

hello sir please tell me what makes price to revert back and how much will it revert back like sometimes price trends make higher high and with small pullbacks of one or five candle consolidate at some level which looks like profit booking not mean reverting so how to trade add position in these setups....?

The very nature of space-time is changed because it actually contains these changes of scale in an intrinsic and irreducible way to the ordinary space-time which is, in itself, in the physico-mathematical vision, a set of points. (...)
In reality, this vision in which we represent the world in the form of points pretends to make measurements with infinitely great precision - at each small spatial interval corresponds a small time interval.
However, it is quantum mechanics that tells us that it would take an infinite energy to be able to make such a measurement. One could say that this is only a limit for the man who observes and measures, but that is false.
This limit, in particular the Heisenberg inequality, is related to the fundamental mechanism of matter and not only to a measurement made by man (or the machine produced by him).
This means that a very small space requirement requires a very long time and a very short time requires a very high energy.
The point, defined with infinite precision, requires infinite energy! Nature can not realize its own interactions, independent of the observer, by constantly spending such infinite energy.
It operates necessarily with imprecision. It is the most energy efficient mechanism. Convergence occurs only after emergence of a global order resulting from the disorder of variable, imprecise and unpredictable interactions. (...)
One point, it does not exist! Moreover, it can be seen right away. If we say that there is a point on a table, what is meant by a point? Something that has no dimension. Just look with a magnifying glass to discover a structure. We continue to magnify the magnifying glass and then we go to the microscope: when can we finally see the point? Never. So, physically, the point does not exist. (...)
The interesting idea is that each time you get fat, you see something new.

As If is a good tool

we do not know really the exact nature of Price and Time Relationship , but we can approximate this relation and use analogy

the Gap Down between the close of Day (N-1) and the Open of Day N can be seen as a "Quantum Leap" . This Gap disturb the previous balance of Price Action . Then Price Action needs some Time to recover its Balance and returned to its mean.

Price and Time can be shown on a Chart to help us , but Price and Time are not of the same nature. Time never goes backwards. Price can.

Space and Time have become inseparable. Two simultaneous events in a reference system are no longer in another reference system.
The principle of relativity implies the absence of a privileged observer. The description of the phenomena should not depend on the different observers. Each of them must find the same physical law. Everyone can find the referential coordinates of other observers. Space is not three-dimensional and there is no absolute time, each individual has his own measure of time depending on the place and the way he moves.
Every moving object has its own clock. If observers observe a phenomenon while moving at different speeds, they will describe the event sequences differently in time and what for one happens in his future, appears for the other in his past.

This, of course, seems unthinkable for our ordinary consciousness, which is experiencing daily an arrow of time, the inexorable flow of a past to the present and the future.
In addition, the time passes more slowly if the speed approaches that of the light (it is the dilation of time). The speed increases the service life (in accelerators, a particle with a very short lifetime sees its life increase at very high speeds close to that of the light).
Mobile clocks delay compared to fixed clocks. It is an illustration of this real existence of space-time.

Before Einstein, space and time had been thought of as possessing fixed characteristics, given once and for all: the geometry of space is, has been and will always be that described by Euclid and time advances independently of all the rest . Things could move in space and evolve over time, but space and time themselves never changed. (...)
Einstein's general theory of relativity differs completely. There is no fixed background. The geometry of space and time varies and evolves constantly, as does the rest of nature. (...) There is no longer a field that moves on a fixed geometric background. On the contrary, we have a collection of fields, all of which interact with each other, which are dynamic, all of which influence others, and the geometry of space-time is one of them.

The astrophysicist Laurent Nottale exposes, in "The complexity, vertigo and promise": "The very nature of space-time is changed because it actually contains these changes of scale in an intrinsic and irreducible way to space ordinary time which is, in the physico-mathematical vision, a set of points. "

One of the fundamental results is that space has a discrete structure (as opposed to the space-time continuum of general relativity): areas and volumes of space are quantized. The notion of space is in a way replaced by the notion of primitive grains, sorts of "atoms" of space or, more exactly, quanta of the gravitational field, connected to each other by links characterized by a spin (spin of link) hence the name of spin network. This field (space-time) should thus present a granular structure in the form of a cloud of space-time grains, the dynamics of which must be probabilistic.

From today, you will consume me as totally crazy to apply all this to trading. But read well and you will find concordances.

So much crap in the main stream, deceptions and half truths.......................

Time is MAN Made............ The fiscal world only knows the present............ we humans can only reflect the past and contemplate the future- but there is no future only the present.

Bending time and space has no basis in real world -- verbal masturbation at its best. Bending space --- define space, please...........Its the either stupid.

Einsteins equations were crap...... Morley experiment was plagiarized..... Its possible that Einsteins wife wrote the formulas.... .....
Einstein even admitted that there had to be a either..... I can go on --- but it does not matter... we live in the age of deception and most science, health, politics- that is main stream is wrong...

Einstein had some missteps. Particularly he introduced a Cosmological Constant to achieve a static (non-expanding/contracting) universe. Einstein revoked the notion when Edwin Hubble proved conclusively that the universe was expanding. Einstein called his Cosmological Constant the biggest blunder of his life.


Tesla references to relativity:
In 1934, on the occasion of his 79th birthday, Tesla denounced relativity theory as "a beggar wrapped in purple whom ignorant people take for a king" and "a mass of error and deceptive ideas violently opposed to the teachings of great men of science of the past and even to common sense... the theory wraps all these errors and fallacies and clothes them in magnificent mathematical garb which fascinates, dazzles and makes people blind to the underlying errors.... its exponents are very brilliant men, but they are metaphysicists rather than scientists. Not a single one of the relativity propositions has been proved." (NYT, 7/11/1935,

hold that space cannot be curved, for the simple reason that it can have no properties. It might as well be said that God has properties. He has not, but only attributes and these are of our own making. Of properties we can only speak when dealing with matter filling the space. To say that in the presence of large bodies space becomes curved is equivalent to stating that something can act upon nothing. I, for one, refuse to subscribe to such a view.

Today’s scientists have substituted mathematics for experiments, and they wander off through equation after equation, and eventually build a structure which has no relation to reality. – Radio Power Will Revolutionize the World in Modern Mechanics and Inventions (July 1934)

“Only the existence of a field of force can account for the
motions of the bodies as observed, and its assumption
dispenses with space curvature. All literature on this
subject is futile and destined to oblivion. So are all
attempts to explain the workings of the universe without
recognizing the existence of the ether and the
indispensable function it plays in the phenomena.
My second discovery was of a physical truth of the greatest
importance. As I have searched the entire scientific
records in more than a half dozen languages for a long time
without finding the least anticipation, I consider myself
the original discoverer of this truth, which can be
expressed by the statement: There is no energy in matter
other than that received from the environment.” – Nikola Tesla

There is so much more --- but this makes the point...... want to know more that is in the present, ck this org out.............







Now what does this have to do with trading....LOL Trade in the present.....and learn from the past .... regards.

perhaps they can bend the space/time (or the chart to be specific); and trade it from the left side.. lol

hello sir please tell me what makes price to revert back and how much will it revert back like sometimes price trends make higher high and with small pullbacks of one or five candle consolidate at some level which looks like profit booking not mean reverting so how to trade add position in these setups....?

Liftoff! We have a liftoff!

Congratulations!
Looks rather like ticktacking marti grid bomb!

Marti? Nope.
Grid? Nope.
Bomb? Absolutely! It's THE bomb.

EU means ready to pull up.

Very good idea!!!!!!

How you came up with the exit parameter is the killer bomb.

@00.00 price will at some point touch the previous day's price area and that is 50% of it.

If you get the average retrace % data across 28pairs from few years and you get your take profit level.

it's soo scary and simple.

Hi Apha first i congratulaite you for your results the curve look's awesome now what i see on the photo is 1 weekly candle wich shows you the weekly trend and bigger M daily candles. Now from your experience (because price allways have tendency to go in 1 direction and revers) you chose reversals in direction of major weekly Trend!? Thanc you.

No. It's a different logic and much more complicated.
The MTF trends are irrelevant for this system. As I said in my earlier posts, from statistical point the time cycles are 100% independent events.

My algos trade all signals, in all 28 pairs, in all directions!
As you can see in the screenshot there are 4 automated Algorithms. (A1, A2, A3, A4). Each algo is a separate system and a different signal. These algos operate in such a way that they have almost no overlap. They also take into account the correlations between the currency indexes (see my previous posts). This is how I detect dangerous situations very early and automatically trigger the equity stop. (before the shit hits the fan) I also put size limits on each position based on the volatility and other things.

Bad things happen only when you get too big too fast against the strongest trends!

So far, in this thread I only gave info and partial description for the first system (A1) and a few clues for the other algos. A few people got it, they understood my ideas and are working on their own versions. The rest still scratch their heads. It is what it is.

Maybe I already gave too much info here.....

AO; good work mate. I like the currency index filter.

if you can elaborate further it will be great.

I tried in the past similar filter but with no statistical significance. i.e. trade only if currency is moving alone; not because of USD index is moving across the board.

The indexes are just one factor. If the whole index is outside 2 standard deviations - take actions to reduce risk (close positions if you have to).

But there are many other factors that you have to track if you want to detect the danger early!

News. Obviously. Turn off the system before major news. This way you avoid almost half of the fat tails. Sometimes manual intervention is necessary.
Pay attention to the spreads! Track the averages! Sudden spread spikes across the board for no reason = danger signal!
Watch out for smooth trends. If the trend is too smooth and too fast with very few corrective moves this is danger signal!
Pay very close attention to the characteristics of Model 3! (the smooth trend).
Unusually high tick volume = danger signal.

There are many more. But just to name a few.
I hope this helps.