Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

Linear Regression based Mean Reversion Strategy

1 min read

Linear Regression based Mean Reversion strategy is quite similar to Volatility Band – Mean Reversion Strategy. Here the Volatility band is replaced with the upper band = Linear Regression + 2 * Standard Deviation and the lower band = Linear Regression – 2 * Standard Deviation.

Nifty Daily Charts
Linear Regression Based Mean Reversion Strategy

 
Long Entry Rules
1)First candle close below the Lower Band of the volatility Band
2)Second candle close above the lower band
3)Third Candle closes above previous candle

Long Exit Rules
1)One can have a static stops Preferably (2*ATR) initially followed by an trailing stop based on the risk the people are willing to take
2)One can exit with human based decisions or predefined target exits once again ATR based exiits are preferable. Choice of deciding the stop loss and profit targets are left to the readers.

Short Entry Rules
1)First candle close above the Upper Band of the LR Band
2)Second candle close below the Upper band
3)Third Candle closes below previous candle

Short Exit Rules
1)One can have a static stops Preferably (2*ATR) initially followed by an trailing stop based on the risk the people are willing to take
2)One can exit with human based decisions or predefined target exits once again ATR based exiits are preferable. Choice of deciding the stop loss and profit targets are left to the readers.

Short Signal in the Daily Charts of Apple (US stock)
AAPL

Which Market Once Can Practice?

One Can Practice in Equities and derivaties stock markets/indices, However it is not advisable to follow in forex or commodities market

Which timeframe i can practice?

You can practice across different timeframes. Pure Intraday Traders can stick to 5min, 10min or 15min. Positional Traders can stick to hourly or 4 hourly and short term Investors can stick to Daily Charts.

Is this code backtestable?
No it is not as sell and cover signals are not defined and left to the traders to decide upon their type of trading and risk levels. So this strategy can be used by discrete traders.

Download LR Mean Reversion Amibroker afl code

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

AllinOneAlerts – Amibroker Alerts Module for Algomojo Users

AllinOneAlerts is one of the most important and most requested modules is to bring all sorts of alerts with few lines of coding efforts....
Rajandran R
58 sec read

Stop and Reverse Cover Orders/Bracket Orders – Automated Chart…

Bracket Order and Cover Order are multi-legged orders which come with default protection with stop loss with reasonable intraday leverage. This tutorial focus...
Rajandran R
11 min read

Exiting Cover Order and Bracket Order for a Particular…

Bracket Order and Cover Order are multi legged orders and cancelling the bracket order and cover order for a particular trading instrument there are...
Rajandran R
1 min read

3 Replies to “Linear Regression based Mean Reversion Strategy”

Leave a Reply

Get Notifications, Alerts on Market Updates, Trading Tools, Automation & More