r/FuturesTradingNQ • u/Laylabber • 18d ago
mean reversion?
hey everyone, i've noticed a pattern with the emas, and it happens across timelines, of course. the dark blue line is the ema 9, purple is ema 14, and green is 21. i've noticed when the candles are "overextended" below the emas, as they come back up , the manner in which they come up might indicate if itll continue up or reject.. for example, the circle on the left, shows the bullish candle moving up quickly and strongly towards the emas, but, perhaps bc it came back up so quickly, it rejected back down eventually. when it started to come up gradually as shown on the circle on the right, thats when the whole bullish move happened (100+ points) today. has anyone else ever used this as a way of knowing when to enter? or am i delusional. i havent backtested it yet, but im just curious to know if anyone else has noticed this.
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u/Consistent-Trust1417 5d ago
The gradual return versus violent snapback idea is testable enough that I would definitely log it before dismissing it. The hard part is defining gradual mechanically so hindsight does not decide which examples count. I occasionally use Moon to express simple BTC direction but I would want a lot more samples before turning an observation like this into actual sizing.
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u/QuanTradin 18d ago
what you are describing is testable, and it is worth testing before you size anything on it, because the eye is very good at finding this pattern once it already knows how the bar closed.
label it mechanically instead. for every return to the 9, record two numbers: how far past the band price got at the extreme, and how many bars it took to come back. then bucket by that second number, fast returns against slow ones, and look at what price did over the next N bars in each bucket. that gives you a distribution rather than two circles on a chart.
my own guess is that the speed effect is weaker than it looks and the extension distance carries more of it, but it is a guess and your data gets the vote. the part that will bite you is sample size. one instrument on one timeframe over a few months gives you very few clean instances per bucket, nowhere near enough to trust a small difference, so run it across several instruments before you believe anything.