06/27/2025
๐ Trading Term of the Day: Mean Reversion! ๐
Ever noticed how prices often snap back after big moves? Thatโs mean reversion in action!
๐ Mean reversion is a strategy that bets on prices returning to their historical average or "mean" after drifting too far. Think of it like a rubber band - stretch it too far, and it eventually snaps back!
๐น How it works: Prop traders buy undervalued assets (below the mean) or sell overvalued ones (above the mean), expecting a reversal.
๐น Where you see it: Stocks, currencies, even volatility!
๐ก Pro tip: Patience is keyโmean reversion plays out over time, not instantly.
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