A Price-Deviation Oscillator for Short-Term Mean Reversion

Summary

The document describes an oscillator intended to represent price’s distance from its recent average, with possible use on very short timeframes or tick charts. Its calculation uses a 10-period standard deviation and moving average to scale the gap between the close and an upper band set two standard deviations above that average. It then marks reference levels at zero, one, and two. The proposed interpretation is to consider a short when the oscillator reaches two and a long when it crosses zero.

The material gives a formula and qualitative trading rules, but no chart details, backtest, transaction-cost analysis, or evidence that the signals are profitable. It explicitly cautions that signals are unreliable and suggests aiming for small objectives. The rule description is also ambiguous about the direction and timing of the zero crossing, so users would need to define it precisely and test it before relying on it.

Key ideas

• The oscillator scales the gap between the close and a volatility-adjusted upper band.
• The calculation uses a 10-period standard deviation and moving average.
• The proposed rules consider shorts at the upper reference level and longs on a zero crossing.
• The document warns that signals are unreliable and favors small profit objectives.
• No empirical testing or trading-cost analysis is provided.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.