"What goes up must come down." Capitalize on price over-extensions by trading the return to the average price.
BTCUSDT
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ETHUSDT
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Prices cannot move in one direction forever. Mean reversion theory suggests that asset prices and historical returns eventually return to the long-run mean or average level of the entire dataset. This strategy involves identifying extreme deviations and betting on the return to normalcy.
Use a 20-period or 50-period Simple Moving Average as your baseline.
Enter when price deviates significantly (e.g., >2 standard deviations/Bollinger Bands) from the mean.
Take profits when the price touches the moving average again. Do not hold for a breakout.
In strong trending markets, price can stay "overbought" or "oversold" for long periods. Contrarian trades can be wiped out.