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Sagar T
Swing Trader
Asked a question 2 years ago

What are the best mean reversion strategies for intraday trading?

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This answer won 200 Reward Points

Vishal Mehta,CMTWIZARD
Founder -

I have been trading mean reversion strategy on short side. Rules are pretty simple. 

Universe : f&o stocks ( so there is on circuit limit fear)

Max position : 10

Leverage :2x 

Short Rule : 

C> 200 sma, RSI(2)> 50, yesterday close >3% then short 1% above yesterday close 

Stop loss 3% and target 6% 

You can watch it here


We calculate the 90-day Moving Average(90d MA) of the stock price and treat that as the underlying stable trend. We also calculate the 30-day Moving Average(30d MA) and can see that it zig-zags around the 90d trend. Now we can build the following strategy:

1)When the value of 30d MA falls below 90d MA we expect it to revert back to the 90d line. That is, the current price is too low and likely to increase. Hence this is a signal to buy

2) Similarly if the value of 30d MA rises above 90d MA we expect it to fall back to the 90d line. Hence the current price is too high and is a signal to sell

Simple strategies work better than complex ones!

I personally use a mix of Bollinger Bands, Pivot and VWAP levels to play mean revision in intraday