Mean reversion in finance assumes that various phenomena of interest, such as asset prices and earnings volatility, eventually return to their long-term average levels.
The theory of reversion to the mean has led to many investment strategies, from stock trading methods to option pricing models.
Mean reversion trading attempts to capitalize on extreme changes in the price of a particular security, assuming it will return to its previous state.
A cup and handle is a technical charting pattern that resembles a cup and handle, where the cup is shaped like a “U” and the handle is slightly offset downwards.
The Dow Theory is a technical framework that predicts that a market is in an uptrend if one of its moving averages rises above a previous important high, followed or followed by a similar rise in the other moving average.
Elliott Wave Theory is a form of technical analysis that looks for recurring long-term price patterns associated with constant changes in investor sentiment and psychology.
Negative or inverse correlation describes when two variables tend to move in the opposite direction and magnitude relative to each other, so that when one variable increases, the other variable decreases, and vice versa.
The unique Three Rivers pattern consists of three candles in sequence: a long real body down, a hammer making a new low, and a third candle with a small up real body that stays within the hammer’s range.
Elliott Wave Theory is a form of technical analysis that looks for recurring long-term price patterns associated with constant changes in investor sentiment and psychology.
The Warden Stochastic differs from other stochastics in that it ranks closing prices by assigning a value based on the ranking of the recent close compared to the previous close.