Glossary Term

Mean Reversion

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Mean reversion is an idea in finance that on a long enough timeline asset prices eventually return to the mean, or to the long term average of the entire asset’s trading history. This is the ultimate logic behind using moving averages to generate trading signals. A trader using moving averages is interested in knowing how high above or how far below the average the current price is trading at.

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What is mean reversion? A Traders Expert explanation

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