Have you ever heard of mean reversion trading algorithms? there are two types of trading algorithms, momentum and mean reversion.
The idea behind mean reversion is whenever something goes too far from its mean it will reverse back to its mean, the mean reversion algorithms use all kinds of data not just price or price-driven data to take trading decisions.
If you spent enough time behind financial time series charts you know that price pulls back whenever it moves away from its mean or average, but we don’t know how far is far and when it will reverse back, the DMA indicator helps you to find how far price is from its mean.
DMA shows a moving average distance from the data it applied to, and also it shows the average distance, you can use the average distance to compare the current distance with the historical average, and you will know if the current distance is too far or not and if it’s then the chance of a reversal is high and you can either take profit on your trend trade or take a reversal trade.
The indicator shows two percentile lines alongside the distance and average distance lines, you can use the percentile lines in a similar way like average distance but the percentile lines are much extreme and the chance of a reversal back to the mean when distance crosses the historical percentile lines are much higher.
DMA is not just reversal traders, it helps both trend and reversal traders and you can use it as a standalone trading system.
- Supports all cTrader moving average types
- You can apply the moving average to different data sources like volume
- Popup, sound, email, and Telegram alerts on trend, reversal signals, and percentile line cross
- Two different types of trading signals
- Fully customizable
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