/biz/ - Business & Finance

crazy how math do that. imagine if you shorted some at each level above the mean and covered at the mean, and bought some at each level below the mean and sold when it returned to the mean? im struggling to find a chart where this doesn't work yet, i'd only guess something stupid like low float penny stocks. but even then give me a stock and i'll take a look if you guys want. note how often the price is between +/-1 standard deviation and how rarely it gets to 2 and how the most extreme is around 3-4 which is the low as you can see, imagine if you bought down there.

im testing it out this week to see how well it works in real time but my idea is that you could enter a half position at 1 SD, double that at 2 SD for a full position, double that at 3 SD and double it again at finally 4 SD. price should only get to 3 SD 0.3% of the time and 4 SD 0.1% of the time roughly, so as you can see they tend to be places where you want to "load the boat" as it were. you exit the position when it reverts to that thick middle line which is where price should be most of the time. you could also potentially just ignore 1 SD completely and just trade at the 2+ SD levels, but i feel like there is still some good money to be made at 1 SD with half a position since price should range around there 2/3rds of the time.

you can do this on any timeframe btw, just means you'd be looking to hold for longer. the /ES chart for 1 Y 1D looks interesting if you consider buying some at the SD's as we went through the covid crash. something to consider if we crash again.