One project I have on my list is to develop a mean reversion system, which as i understand it is based on the premise that residuals will eventually revert to the mean. I also understand this style is tyically short term and has a likening to a timed stop exit and the market should be in trading range. Please confirm.
Ivé done some basic testing with bollingers in various entry / exit combinations but seem to continually breakeven (after slippage and brokerage).
For eg (long entry)
Enter:= ADX<20 AND Close above upper Bol * 2 STDEV
Exit:=Close above middle band
I would appreciate any tips, suggestions or approaches people may give in this area. In particular I have found the topic of mean reversion only briefly covered in books. Does anyone have any recommended readings, particularly adaptable for systems development.