Mean Reversion strategy

 In trading, price fluctuations are common. The mean reversion strategy works on the concept that high or low prices of a share are a temporary phenomenon and they will bounce back to their mean or average value.

In the mean reversion strategy, the algorithm is set to identify and define the mean price range and execute the trade when the share breaks in and out of its defined price range. 

This is a good Algo trading strategy to safeguard from extreme price swings.  For example: when the 30-day moving average is lower than the 120-day moving average, the algo is set to assume that the average price will come back to the 120-day moving average, thus the algorithm is signaled to buy the shares. 

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