75 Mean Reversion System uses the Relative Strength Index to gauge when a stock becomes oversold during an uptrend or overbought during a downtrend. It aims to make quick trades that last only for a few days. In that book, they suggest that adjusting the time period for the RSI indicator from its standard of 14 down to 4 will dramatically increase forex mean reversion indicator mt4 edge of that indicator. Then, it signals a long position anytime a market in an uptrend has its RSI indicator drop below 25.
It exits that position when the RSI crosses above 55. For a downtrending market, the system enters a short position when the RSI rises above 75 and exits that position when the RSI drops below 45. There were a total of 786 trade signals on the long side that averaged a return of 1. The trades averaged a length of 6.
On the short side, 383 trades were signaled. Those trades averaged a profit of 1. Wondering if publishing the system would skew its performance, blogger Sanz Prophet tested the system from the beginning of 2009 through September 5, 2012 trading both long and short signals. His results showed that the system logged an annual return of 7.