Mean Reversion Indicator

Mean Reversion Indicator is also known as the rainbow indicator. Those traders who look for dynamic support and resistance levels while trading may find it as the best Forex indicator to trade on.  According to the past track record, this tool has maintained an excellent track record with a great level of winning rates.

Mean Reversion Indicator is applicable to all Forex currency pairs and works great at all kinds of timeframe charts. So, from short-term scalpers to intraday or long-term traders, everybody can be vastly benefited from Mean Reversion Indicator.

Mean Reversion Indicator Overview

Once you are done with the installation of the Mean Reversion Indicator at your Forex mt4 terminal, your trading chart will appear as the following image:

Mean Reversion Indicator

Mean Reversion Indicator uses two upper channels as dynamic resistance levels and two lower channels known as the dynamic support levels. The mid-dotted line is the trend decider. If the price closes above the mid-level, it assumes that the price is most likely going to hit the upper resistance levels or vice versa.

Though it is recommended that, you should make the buy entry from the lower channel and sell from the higher channel. To be able to do that, you’ll have to wait for a clear pin bar/rejection candle of false breaks at such levels to look for possible market entry.

Recommended Mean Moving Average: VAR Moving Average

Mean Reversion Indicator: Buy Parameters

Mean Reversion Indicator Buy Parameter
  • Price is supported by the lower channel
  • Price bar closes successfully above the lower channel
  • Trigger the buy entry when the above conditions are met and set the stop loss below the respective support level
  • Hold your entry if price moves above the mid channel
  • Exit long once price hits the upper channel

Mean Reversion Indicator: Sell Parameters

Mean Reversion Indicator Sell Parameters
  • Price is resisted from going up by the upper channel
  • Price bar closes successfully below the upper channel
  • Trigger the sell entry when the above conditions are met and set the stop loss above the respective resistance level
  • Hold your entry if price moves below the mid channel
  • Exit short once price hits the lower channel

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I have been actively trading stocks and currencies since April 2012. Besides trading with my personal money I am a technical analyst in a mutual fund which has Rs. 1 billion in assets under management. At my leisure, I love attending live music, traveling, and partying with friends.

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