Mean Reversion

The mean reversion concept we use at Vtrender works on the two standard deviation concept stating clearly that prices have a less than 5 % chance of staying below the 2 SD price.

 

We track this intra day in our charts, but the concept works  on all time frames and is a much better indication of oversold/ overbought conditions than most oscillators. The only difference is that the vwap module of 2SD takes into consideration Volume as well unlike Price used in most oscillators.

 

Have a look :

 

Nifty :

 

Vtcompo 1 10 Mean Reversion

 

BankNifty :

 

Vtcompo Bn 3 Mean Reversion

 

Focus on the blue lines and you will note that the odds of bouncing higher from the lower blue lines are indeed very high.

 

The statistical probability is 95 %.