How Algorithms Trade Price Returning to the Mean

📊 Mean Reversion Algorithms: Trading the Return to Average Prices Mean reversion is based on a simple idea: When price moves unusually far away from its normal or average value, it may eventually move back toward that mean. But there is an important difference between: **Price temporarily stretched from its average** and **Price starting a genuine new trend.** A good mean-reversion algorithm must identify that difference. --------------------------------- 📊 What Is the “Mean”? The reference mean could be: • Moving Average • VWAP • Bollinger Band Midline • Rolling Statistical Average •…