Alerta Mean Reversion PRO by Bruno MoscanMean Reversion Overstretch: A Strategic Distance-from-Mean Tool
Overview
Successful trading is often about identifying market exhaustion. When prices deviate too far from their historical average, the probability of a "rubber-band effect" (a sharp snap back to the mean) increases significantly.
This tool is a specialized Mean Reversion Oscillator and Visualizer designed to highlight extreme price dislocations. By calculating the percentage distance from a 100-period Moving Average (MA), it identifies high-probability zones for Long and Short entries where most traders are blinded by FOMO or FUD.
How It Works
1. The Core Logic (The Mean)
The tool tracks the 100-period Moving Average (default). This serves as the "fair value" of the asset.
Bullish Environment: When price is above the MA, the background turns a soft green, indicating the dominant trend is up.
Bearish Environment: When price is below the MA, the background turns a soft red, indicating the dominant trend is down.
2. Extreme Deviation Signals (The "Stretch")
The indicator triggers signals based on aggressive mathematical exhaustion points:
SELL/SHORT (The Blow-off Top): Triggered when the price reaches 100% above the MA. This identifies "parabolic" moves that are statistically unsustainable.
BUY/LONG (The Capitulation): Triggered when the price drops 40% below the MA. This identifies deep "oversold" conditions where a bounce is imminent.
3. Smart Filters (The Professional Edge)
To prevent "false positives," we’ve integrated two institutional-grade filters:
Volume Confirmation: Signals only trigger if the current volume exceeds the 20-period Volume MA. This ensures the move has the necessary "fuel" to mark a turning point.
Automatic Exit Points (Take Profit): The script marks an "X" on the chart when the price returns to the 100-MA. In mean reversion, the MA is your ultimate target.
Key Features
Fully Customizable: Tailor the MA period, source (Close, HL2, etc.), and percentage thresholds to fit any asset—from Blue Chip stocks to volatile Altcoins.
Visual Clarity: Clean labels and arrows for entries, and discrete symbols for exits.
Psychological Comfort: The subtle background coloring helps traders remain calm and aligned with the macro trend.
Alert Ready: Built-in alerts for Long and Short conditions so you never miss a trade even when away from your screen.
How to Trade with this Tool
Identify the Signal: Wait for the "BUY/LONG" or "SELL/SHORT" label.
Check the Context: Ensure the signal aligns with your risk management.
The Exit: Close the position (or take partial profits) when the price touches the 100-period Moving Average.
"The market is a pendulum that forever swings between unsustainable optimism and unjustified pessimism. This tool is designed to catch the pendulum at its peak."
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