Mean reversion
Definition · Level 0 · Market basics
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The tendency of a price, spread or indicator that has stretched far from its average to drift back toward it; also a strategy that fades extreme moves.
Example
Stock −8% in a day on no news, far below its 20-day average: buy for a bounce.
Where Tradecraft teaches it
Level 0 · Market basics, in the lesson “Indices, funds & market regimes”: The benchmarks everyone quotes, how ETFs track them, and the vocabulary for market moves.
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