Mean reversion, common questions
Straight answers on the method: what it is, whether it works, how a stretch is measured, how it differs from momentum, and how to check a record built on it.
The questions readers ask first
What is a mean-reversion strategy in simple terms?
It is a bet that a price stretched unusually far from its typical level will return toward it. You buy what has fallen too far or sell what has risen too far, and you close the trade as the gap narrows. The whole skill is in defining 'too far' and knowing when the stretch is a temporary overreaction rather than a real change in value. More: the method, from the premise up.
Does mean reversion actually work?
It works when the price has a stable level to return to and when the rare trade that does not revert is bounded by a hard stop. It fails in strong trends, where 'too far' keeps getting further. So the honest answer is conditional, and the conditions matter more than the strategy's name. More: the three conditions for profitability.
How is 'too far from the mean' actually measured?
Against the price's own variability. A gap is scored in standard deviations - how it compares to the price's typical wiggle - so a two-deviation stretch is a stronger signal than a half-deviation one. A measured conviction grade is just this stretch turned into an A-to-D letter. More: the statistics of reversion.
What is the difference between mean reversion and momentum?
They are opposite bets. Momentum says a price that has moved keeps moving; mean reversion says a price that has moved too far comes back. Both work, but at different horizons and in different regimes, so the real skill is telling which one the market is currently rewarding. More: mean reversion vs momentum.
How do I know a reversion call was not added after the move?
Ask whether the trade was timestamped to a public ledger when it was issued. If it was, changing any field - entry, target, stop or grade - would break the hash and no longer match the public receipt. The worked example anchors every trade to Bitcoin this way. More: issued before the outcome, and how to check one yourself.
What win rate should a mean-reversion strategy have?
No single figure is right, and a percentage by itself tells you almost nothing. A 74.4% win rate shown with 78 trades and the losers included is far more trustworthy than a 95% banner with no count. Because reversion can post a high win rate while a few large losses sink it, the drawdown matters as much as the win rate. More: why the count and drawdown are the whole test.
What do the A-to-D grades mean on a reversion trade?
Each trade carries a grade from A (highest) to D (lowest), set by how far into the tail its stretch sits in that model's own return distribution. It is a four-step ladder, A through D. Because the grade is sealed into the same digest as the trade, it is fixed before the outcome is known. More: grades that are measured.
Who is behind the worked example on this site?
Darren O'Neill, the founder of the #1-ranked provider and the 2023 Trading World Champion, who also posted real-money results in the 2025 World Cup Trading Championships. He runs four systematic mean-reversion models on different holding clocks and timestamps every issued trade to Bitcoin. An outside party reviews the record rather than him reporting it himself. More: about this site and where the numbers come from.