This strategy works on the understanding that historical returns and asset prices will at some point return to their average levels. This strategy attempts to capitalise on dramatic changes in the price of a security, with a view to it returning to its previous position.
This is a strategy that can be applied to buying and selling; traders can make a profit on surprise upswings and then save on anomalous lows.
It pays to remember that there are no guarantees in forex trading and that includes a return to a normal pattern. Uncharacteristic highs could return to a normal pattern, but equally, the high could be caused by certain events which throw things off-kilter long term.
