Mean Reversion Trading System

The first step in building such a system is to define what mean reversion is. Mean reversion systems are looking for markets that are unusually high or low and will eventually return back to the mean. We want a system that looks at a particular market with a significant deviation from their average. Our previous research we did on opening range breakout systems already showed us that opening range breakouts define the trend for the rest of the day in about 30% of the time. Which means that out of 20 trading days we have 14 days of price patterns that are reverting back to the mean.

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Risk Management

If one thing can be called the holy grail of trading or at least come close to it then its money management. Some people call it diversification while others call it how to wisely invest your hard-earned dollar.In simple words money management is the rule book that tells you how much of your money you should put at risk for a particular trade. We ar writing this post to give you an overall understanding of money management and how to use it for your trading strategies.

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