What is Mean Reversion?
Mean reversion is the idea that after a price moves far from a typical or average level, it often moves back toward that level. Strategies built on it look for stretched conditions and bet on a pullback toward the middle. The idea is intuitive, but markets can stay stretched longer than expected, and a true trend can keep going instead of reverting.
Why Mean Reversion matters
Mean reversion and trend following are opposite assumptions, so naming it helps you understand what a given strategy is betting on.
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