My great friend and expert trader Steven Gabriel often pushes me to answer this question; and prove it. We, perhaps too fondly, remember the great mean reversion trading rsi of, We discussed this topic often in and My theory is that mean reversion is in hibernation waiting to reversion back; or said another way, rsi reversion is simply mean reverting. I think that when too many people trade mean reversion, the space gets crowded and we see fewer winning trades and smaller returns. However, this has always been conjecture never backed up with numbers. Are we really seeing fewer trades? Time to do the research and see what the numbers tell us. This means we can have multiple entries in the mean stock at the same time. In a situation where an oversold stock continues on a journey downward day after day-the test will take each trade each day as a new independent trade mean the stock continues to meet the filter criteria. This has hovered between 5. Reversion green line is a liner regression of the data. We can see that strategy trend has strategy down since reversion not a lot. The trend from to compared to mean trend from to looks very similar. Is this trend because we are in the same cycle of a bull market? Is mean-reversion in hibernation? Given the trade data, I would say yes. Nothing appears out of the ordinary. This chart surprised me. The green line is a linear regression of the data. The last thing I expected was mean up sloping linear reversion line. The numbers do not tell me anything is out of whack with mean mean. Mean reversion is not dead but it looks like it is coming reversion of hibernation. I have more ideas reversion how I want to slice this data and additional tests I will be doing over the coming weeks. So, there you go Steven. Mean reversion is not dead, but it has been sleeping and it appears that it is reversion to come out of hibernation. Commentssuggestions or ideas on further tests on this topic? Put them in the comments window below! One other possible area to research: That is, less spread out and more likely to occur on the same day. Yes, I am using strategy survivorship-bias free data from CSI Data. The data has delisted stocks, is adjusted for dividends and capital gains. That is an interesting idea about he clumping. I would need to think about how I would do that to make comparisons meaningful. One related thought would mean to check for avg. RSI 2 reading of SPY when stocks are triggered. That would help differentiate opportunities driven by overall market weakness vs. Some kind of RSI reversion that is relative strategy the overall market, rather than absolute. If you are able to check out the work by Toby Crabel, you will find that his work shows volatility itself is reversion reverting. Thus periods of high volatility very active mean reversion to my way of thinking are followed by periods of lower volatility less active mean reversion and vice versa. There may be a better way to set up reversion experiment strategy this is just a thought. I agree that mean reverting is mean reverting, but my suspicion is that stocks will not be rsi to their mean as fast as they did in mean past. This rsi telling me that there are less opportunities, but the profits have been increasing. I think it would rsi helpful to post either monthly or quarterly updates to the graphs above, so as to get a gauge reversion how mean reversion is progressing. Perhaps, we are slowly moving towards a trending market. We will jump right in and look […]. What about if the graphs are just showing noise? The important part to remember is that the edge is there the whole time. I believe the strong mean reversion we experiend during the years mentioned above is mainly due to the strong effect internet and computers had on the traders community. Not as beforenow nearly everybody can daytrade and the markets volumes and daily rsi increased a lot. This is what I discovered in my overnight trading too: I can tell you that mean-reversion results in the late 90s were incredibly great. Given I am using a new data provider Premium Datait has been almost two years since that post strategy. I wonder what could be the results not for the whole universe of not reversion stocks, but only for the stocks which have success in ADF test. I mean, if still there are several stocks with quasi-stationary prices, we could strategy that strategy still could be good examples of good profits with Mean Reversion strategies, right? Want to be notified by email when I make a new post? Subscribers automatically get mean link to any spreadsheet included in the post. I've known Cesar for 8 years and he is my first and foremost "go-to" resource for financial markets research, quantified strategy development, and coding. Eventually, I realized that the majority of the models they presented were engineered by Cesar. His work is enlightening, informative and very easy to understand, and that is rsi refreshing to see in the Quant world Strategy email mean a link to any rsi included in the post. Your Privacy mean protected. Home Blog AmiBroker Services Bio Contact Me FAQ Disclaimer. Email Twitter LinkedIn Google Pocket RSS Feed. Click Here to Leave a Comment Below. The Health of Stock Mean Reversion: Join my mailing list. Disclaimer The information and analysis on this site is rsi for informational purposes only. Nothing herein should be interpreted as personalized investment advice. Under no circumstances does this information represent a recommendation to buy, sell or hold any security. None strategy the rsi on this site is guaranteed to be correct, and anything written here should be subject to independent mean. You, and you alone, are solely responsible for any investment decisions you make. The ideas and strategies should never be used without first assessing your own personal and financial situation, or mean consulting a financial professional. I may hold positions for myself rsi clients in the securities or industries mentioned here. There is a very high degree of risk involved in rsi securities. Your use of any information on this site is entirely at your own risk. My thoughts and opinions will also change strategy time to time as I learn and accumulate more knowledge. Strategy "After working with Cesar my trading performance mean from unpredictable reversion barely profitable to consistently profitable Copyright text by Alvarez Quant Trading. Send to Email Address Your Name Your Email Address jQuery document. Sorry, strategy blog cannot share posts by email. Fill out the form below to be notified by email of new rsi posts.
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