Mean Reversion Entries on Large EMA Deviations

Summary

This strategy looks for long entries after price falls substantially below a 50-period exponential moving average, treating the gap as a possible oversold dislocation. It exits a long when the high rises above the EMA and the open position is profitable beyond a fixed threshold. Position sizing is described as cash-based. Although the document discusses deviation calculations for both price and high, the actual trade logic only opens long positions; it does not present a symmetric short strategy. The published settings identify an ETH futures test interval, but no results or performance measures are given.

The central assumption is that a large price deviation will eventually reverse toward the moving average. That assumption can fail in a persistent downtrend, leaving the position exposed to further losses. The source has no explicit stop loss, and the profit threshold does not adapt to volatility. Dynamic thresholds, stop rules, staged trading, and additional filters are suggested as possible improvements, but none are evaluated in the provided evidence.

Key ideas

• A long entry is triggered when closing price is more than the stated threshold below a 50-period EMA.
• The long position closes when the high exceeds the EMA and the open trade has sufficient profit.
• The described trade logic is long-only despite calculating a second deviation based on the high.
• A sustained downtrend can deepen losses because the source specifies no stop loss.
• The document lists an ETH futures backtest window but reports no performance results.

Tags

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