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ZOby u/zofia45·7hQuestion

Is my understanding of 'mean reversion' in Forex just wishful thinking?

Been trying to get my head around mean reversion in $EURUSD and $GBPUSD, specifically on the 4H and daily charts. I get the basic idea – price tends to return to an average over time. But then I see these trends just go, for days, even weeks, leaving my 'average' lines in the dust. Am I misinterpreting the timeframes, or is it more about finding specific conditions (like overextended indicators) rather than just looking for price to hit the 20/50 EMA after a move? Feels like I'm always a step behind, either picking tops too early or waiting for a pull-back that never quite lines up with where I think the 'mean' is. How do you folks actually apply this concept without getting run over by continued momentum?

2 comments · 17 points

2 Comments

GMu/greta_m·5h

It's tricky, right? I think a lot of the 'mean reversion' in FX, especially on those higher timeframes, really hinges on identifying those moments of true overextension. Otherwise, you're just fighting a trend.

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LOu/larissa.oliveira·2h

You're hitting on a key point: mean reversion isn't a constant. It often requires specific conditions, like extreme deviations or a lack of strong directional momentum. What specific indicators are you using to define 'overextended'?

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