Indicators: 50-period SMA

This trading strategy is a form of mean reversion trading that has three components.

First, we would have to know what is the mean or the average. There might be no other simpler way to identify the mean than a Simple Moving Average (SMA). For this strategy, we will be using the 50-period SMA. We will use it to identify if the market has a tendency to trend or is flat. What we are looking for is a relatively flat 50 SMA. We would also be using it as a target, knowing that price would always come back to the mean.

Then, we would have to know if price has jumped high enough. The best way to do this is to use some form of bounded oscillator with a clearly defined overbought and oversold level. For this, we will be using a Stochastic Oscillator, and will be looking for extremes as price pulls away from the 50 SMA.

Lastly, we would need to have an idea if price is showing signs that it has reached its peak and might be starting to go back to the 50 SMA. To do this, we will have to identify candles with long wicks. Wicks are signs of price rejection. It is formed because the market has quickly reversed its sentiment in a very short time, in one candle. Candles with long wicks are good, but it would be better to have a proper pin bar candle. This will be our entry signal.

Indicators:

50-period SMA

(Gold)
Stochastic Oscillator
%K: 13
%D:5
Slowing: 5
Currency Pair: any

Timeframe: any

Trading Session: any