Kairi will use the mean-reversion when the price deviates from the average

Kairi

This is an indicator that displays the divergence from moving average prices

The calculation method is

(Current price - average) ÷ average × 100

This indicator leverages the characteristic that the price tends to return to the moving average after diverging (diverging from the moving average), to gauge trading timing

First, as one method

Using divergence from the MA to implement a mean-reversion strategy

The rule that once the price moves away from the average, it will temporarily return

is treated as an advantageous methodology

I touched on this in the recent article about envelopes in Investment Navi+

https://www.gogojungle.co.jp/finance/navi/1171/21592

Reversion methods with Bollinger Bands at 3σ are also one of the widely talked-about techniques

“Prices revert when they diverge”

There are differences in calculation methods and thinking, but

this indicator

Kairi

What do you think?

In short

From the divergence from EMA(20),

I placed the level line at 0.06 to -0.06

With EMA(20), prices are usually contained within this range

If it crosses beyond, it tends to revert

However, there are times when it does not revert even after crossing

Deciding where to cut losses is very difficult

MA can be SMA as well, and you can use longer periods

If you use it

Set levels for how far it departs and

Decide which period and which type of MA to use, and test

to tailor the settings to yourself

“Prices revert when they diverge”

seems reasonable. Conceptually

But when you look at this indicator,

and envelopes, and Bollinger Bands as well,

Ultimately, it is difficult to apply to trading

that is my conclusion

Conversely!

It may serve as a basis for exiting.

Rather, it feels like a sense you could rely on.

When the price strongly trends upward,

you think, “a pullback is coming soon.”

Of course, when it runs up strongly, those who aim for profits begin to

start taking profits,

making the price more likely to revert

As a side note, price movements fluctuate because profits take and losses are incurred

and so on

Still,

if the upward momentum remains strong, it will rise again

If the upward momentum is about to weaken, it will not extend and will tilt toward a downward direction

Well, it’s a natural thing to say

Someone somewhere is buying and selling

Keeping that in mind when trading

is an important sense to have.