Let's explain and implement a mean reversion strategy that relies on the Absolute Price Oscillator (APO) trading signal indicator we explored in Chapter 2, Deciphering the Markets with Technical Analysis. It will use a static constant of 10 days for the Fast EMA and a static constant of 40 days for the Slow EMA. It will perform buy trades when the APO signal value drops below -10 and perform sell trades when the APO signal value goes above +10. In addition, it will check that new trades are made at prices that are different from the last trade price to prevent overtrading. Positions are closed when the APO signal value changes sign, that is, close short positions when ...
Mean reversion strategy using the absolute price oscillator trading signal
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