Playbooks

What it is

Mean reversion reads a move that has stretched far from an average as likely to return toward it. It only fits a market without a trend: in a trend, stretched gets more stretched. This checklist decides whether the conditions hold before any reversion scenario is described.

What to look for

Report each check as pass or fail.

1. No trend. The "Trend-Following Checklist" scores 2 or fewer, or get_candles.structure.trend is a range.
2. Flat averages. In the analyze_asset snapshot, the 20 and 50-period averages are flat and intertwined.
3. Stretch. Price is outside the Bollinger band, or RSI is beyond 70 or under 30, in the snapshot.
4. Range context. The stretch is into a known support or resistance zone, or the edge of the recent range.
5. Calm backdrop. No high-impact event or earnings date in the next days (get_macro_snapshot calendar), and volatility is not expanding ("Volatility Regime").

How to mark it

• zone kind range for the range, and level for its midpoint, labelled Mean.
• zone kind supply or demand at the edge price stretched into.
• marker on the stretched candle, labelled Stretch.
• position for a concrete scenario: entry back inside the band, invalidation beyond the stretch extreme, target the mean.

Scenario logic (analysis, not advice)

• All five pass: describe a reversion toward the mean, with the reward-to-risk to the midpoint.
• Check 1 or 2 fails: a trend may be in charge; describe no reversion and say why.
• Check 5 fails: event or volatility risk; say the range may not hold.

Invalidation

A close beyond the stretch extreme, or a range edge broken with a close outside it, ends the read: the market may be starting a trend.

Pitfalls

Oversold can stay oversold. Do not average into a stretch in the description of a scenario, and do not call a range from a handful of candles.