Mean Reversion Strategy
Price often reverts to its average after extreme moves. Mean reversion traders exploit this by:
— Spotting overbought/oversold levels using tools like Bollinger Bands or Keltner Channels
— Buying dips or shorting spikes near the 3rd standard deviation
— Targeting a return to the 20-day moving average
— Using stop-losses in case the trend continues
It’s not foolproof — but with proper risk/reward, it’s powerful in ranging markets.
