Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Ammeo

Mean Reversion

Recommended Posts

Its a simple thing meaning prices and returns eventually move back towards the mean or average value over a historical period of time...we are now Gold and Apple coming to what we could call a mean reversion cause if we average the prices of their 5-10 years time then they stand around their mean or somewhat above or below.

 

However, Inflation plays a different role in calculation "Mean Reversion" as inflation adjustment will most probably move the average higher than what really seems which could mean Gold or Apple could be slightly undervalued.

 

So my question will be is it now a good time to buy any of Gold or Apple or any other asset out of its Mean Reversion? i am personally still bearish on both but think both could provide a good buying opportunity in near future...

Share this post


Link to post
Share on other sites

First, you have to be careful how you define "mean".

 

Second, you have to be careful what you're applying that definition to.

 

Gold is a commodity. Apple is a stock. Then of course there are indices. And futures.

 

Gold as a commodity is worth whatever people are willing to pay for it. Whatever it was a year ago or five years ago or ten years ago isn't particularly relevant, particularly since gold has little intrinsic value beyond its industrial use.

 

Apple is a stock, and its intrinsic value is its book value, which is considerably less than its price at present.

 

Then there are the indices, which are an amalgamation of all the stocks and so forth of which they are comprised.

 

Therefore, you are probably better off looking to the past, where a great many people were interested in and willing to purchase as they may be interested in and willing to purchase at the same price again. With regard to gold we are in one of those ranges now. Whether people will eagerly buy here or eagerly unload what they have remains to be seen. Anticipate both outcomes.

Share this post


Link to post
Share on other sites
I

However, Inflation plays a different role in calculation "Mean Reversion" as inflation adjustment will most probably move the average higher than what really seems which could mean Gold or Apple could be slightly undervalued.

 

So my question will be is it now a good time to buy any of Gold or Apple or any other asset out of its Mean Reversion? i am personally still bearish on both but think both could provide a good buying opportunity in near future...

 

Ask yourself is gold really going to adjust and revert to an inflation adjusted mean....then ask has it done so in the past. (InflationData: Is gold really a hedge?) When a sales man tells you gold is a great inflation hedge, then they tell you in the next breath that gold should be at $5000 oz because of this, ask them so why has it been such a bad inflation hedge over that time if it is meant to be a great one.

 

Is this a good measure to even define your mean? What time frame are you talking about?

Are you using real gold prices to adjust for inflation (adjust furtures prices its different again)....which countries inflation, in USD....if you adjust for people in different countries the results vary.

 

and as DBP says comparing Apple and gold - crazy.

 

It appears you might be looking for a justification for a trade.

 

It does raise an interesting question as well regards support and demand - when people adjust prices areas of support and resistance change.....people dont think and react like this in real life - they think oh i bought it at $400. They dont take into consideration that it was many years ago.....just food for thought.

Share this post


Link to post
Share on other sites

Re my post above, a chart of the S&P may help illustrate this notion of "mean".

 

To a large extent the S&P has been in a trading range since '97. If you take the middle of this range, you get the mean (the pink line). If you go by trading volume, i.e., where the most trading has taken place, you end up a little higher (the blue line, +/-). Whichever, the index will revert to this mean. And has for 16 years.

 

When most people talk about mean reversion, however, they do so within the context of the "uptrends" and "downtrends" within this trading range. If you were to draw trend channels to track these up and down swings (not done here to keep things simple), you would be able to draw a line through the centers of these channels. These would be the means for each of these channels, which are essentially diagonal trading ranges (this accounts for the commonly-held and incorrect notion that trendlines provide support and resistance).

 

With gold, you would/could have seen this dynamic beginning at the end of 2011, and gold bounced back and forth through the mean of this range for 19 months (though it would have taken a month to establish the mean to begin with). Now, however, gold has dropped out of this range and is seeking "value". Good luck with that.

 

Apple traded in a series of ranges until the end of 2011 (though if one used a small-enough interval, he could find many ranges on the way up and the way back down). But that's old news. Now, like gold, Apple traders/investors are seeking value. In this case, though, Apple, like most stocks, has an intrinsic value. Whether or not investors are willing to pay a premium over that remains to be seen.

 

In both gold and Apple, therefore, "mean reversion" is no longer particularly appropriate unless one tortures a trendline into fitting whatever the chartist has in his mind. The market, though, doesn't care what the chartist has in his mind. It's interested only in where transactions have taken and are taking place. And in the case of Apple, the last of these "congestions" spanned July through Dec '11, which is where we sit now.

Image8.thumb.png.233c7cd3df094e02ddbf6d648c755b76.png

Share this post


Link to post
Share on other sites
Ask yourself is gold really going to adjust and revert to an inflation adjusted mean....then ask has it done so in the past. (InflationData: Is gold really a hedge?) When a sales man tells you gold is a great inflation hedge, then they tell you in the next breath that gold should be at $5000 oz because of this, ask them so why has it been such a bad inflation hedge over that time if it is meant to be a great one.

 

Is this a good measure to even define your mean? What time frame are you talking about?

Are you using real gold prices to adjust for inflation (adjust furtures prices its different again)....which countries inflation, in USD....if you adjust for people in different countries the results vary.

 

and as DBP says comparing Apple and gold - crazy.

 

It appears you might be looking for a justification for a trade.

 

It does raise an interesting question as well regards support and demand - when people adjust prices areas of support and resistance change.....people dont think and react like this in real life - they think oh i bought it at $400. They dont take into consideration that it was many years ago.....just food for thought.

 

I am not looking for a justification for a trade...and im not comparing Gold with Apple either or to any indices or futures whatsoever.....i just simply asked on opinions on how the mean reversion phenomenon can currently be applied to both the assets with adjustment to inflation, i know am not the guru here and nor will be, even many big hedge fund managers dont call themselves the guru cause in the end its the market that always wins ...

 

Btw thanks for the link,i'll read it out..:)

Edited by Ammeo

Share this post


Link to post
Share on other sites

So my question will be is it now a good time to buy any of Gold or Apple or any other asset out of its Mean Reversion? i am personally still bearish on both but think both could provide a good buying opportunity in near future...

 

I believe its time to buy gold. But I am not sure about Apple.

Share this post


Link to post
Share on other sites
I believe its time to buy gold. But I am not sure about Apple.

 

It is always a sense to buy gold in long term run because it will grow in price whenever economic scenario gonna take its way. But my broker Hotforex offers only CFD on gold no futures, but i thing it is enough to speculate and get good 20-30 pips everyday

Share this post


Link to post
Share on other sites

mean reversion is a theory suggesting that prices and returns eventually move back towards the mean or average. This mean or average can be the historical average of the price or return or another relevant average such as the growth in the economy or the average return of an industry.

 

This theory has led to many investing strategies involving the purchase or sale of stocks or other securities whose recent performance has greatly differed from their historical averages. However, a change in returns could be a sign that the company no longer has the same prospects it once did, in which case it is less likely that mean reversion will occur. Percent returns and prices are not the only measures seen as mean reverting; interest rates or even the price-earnings ratio of a company can be subject to this phenomenon.

Share this post


Link to post
Share on other sites
mean reversion is a theory suggesting that prices and returns eventually move back towards the mean or average. This mean or average can be the historical average of the price or return or another relevant average such as the growth in the economy or the average return of an industry.

 

This theory has led to many investing strategies involving the purchase or sale of stocks or other securities whose recent performance has greatly differed from their historical averages. However, a change in returns could be a sign that the company no longer has the same prospects it once did, in which case it is less likely that mean reversion will occur. Percent returns and prices are not the only measures seen as mean reverting; interest rates or even the price-earnings ratio of a company can be subject to this phenomenon.

 

Maybe because investing in an asset overheats it's and sometimes it needs to cool down to launch the process again. I stick to the opinion that the higher is upsurge the deeper is collapse when it happens. What do you think?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date: 11th July 2025.   Demand For Gold Rises As Trump Announces Tariffs!   Gold prices rose significantly throughout the week as investors took advantage of the 2.50% lower entry level. Investors also return to the safe-haven asset as the US trade policy continues to escalate. As a result, investors are taking a more dovish tone. The ‘risk-off’ appetite is also something which can be seen within the stock market. The NASDAQ on Thursday took a 0.90% dive within only 30 minutes.   Trade Tensions Escalate President Trump has been teasing with new tariffs throughout the week. However, the tariffs were confirmed on Thursday. A 35% tariff on Canadian imports starting August 1st, along with 50% tariffs on copper and goods from Brazil. Some experts are advising that Brazil has been specifically targeted due to its association with the BRICS.   However, the President has not directly associated the tariffs with BRICS yet. According to President Trump, Brazil is targeting US technology companies and carrying out a ‘witch hunt’against former Brazilian President Jair Bolsonaro, a close ally who is currently facing prosecution for allegedly attempting to overturn the 2022 Brazilian election.   Although Brazil is one of the largest and fastest-growing economies in the Americas, it is not the main concern for investors. Investors are more concerned about Tariffs on Canada. The White House said it will impose a 35% tariff on Canadian imports, effective August 1st, raised from the earlier 25% rate. This covers most goods, with exceptions under USMCA and exemptions for Canadian companies producing within the US.   It is also vital for investors to note that Canada is among the US;’s top 3 trading partners. The increase was justified by Trump citing issues like the trade deficit, Canada’s handling of fentanyl trafficking, and perceived unfair trade practices.   The President is also threatening new measures against the EU. These moves caused US and European stock futures to fall nearly 1%, while the Dollar rose and commodity prices saw small gains. However, the main benefactor was Silver and Gold, which are the two best-performing metals of the day.   How Will The Fed Impact Gold? The FOMC indicated that the number of members warming up to the idea of interest rate cuts is increasing. If the Fed takes a dovish tone, the price of Gold may further rise. In the meantime, the President pushing for a 3% rate cut sparked talk of a more dovish Fed nominee next year and raised worries about future inflation.   Meanwhile, jobless claims dropped for the fourth straight week, coming in better than expected and supporting the view that the labour market remains strong after last week’s solid payroll report. Markets still expect two rate cuts this year, but rate futures show most investors see no change at the next Fed meeting. Gold is expected to finish the week mostly flat.       Gold 15-Minute Chart     If the price of Gold increases above $3,337.50, buy signals are likely to materialise again. However, the price is currently retracing, meaning traders are likely to wait for regained momentum before entering further buy trades. According to HSBC, they expect an average price of $3,215 in 2025 (up from $3,015) and $3,125 in 2026, with projections showing a volatile range between $3,100 and $3,600   Key Takeaway Points: Gold Rises on Safe-Haven Demand. Gold gained as investors reacted to rising trade tensions and market volatility. Canada Tariffs Spark Concern. A 35% tariff on Canadian imports drew attention due to Canada’s key trade role. Fed Dovish Shift Supports Gold. Growing expectations of rate cuts and Trump’s push for a 3% cut boosted the gold outlook. Gold Eyes Breakout Above $3,337.5. Price is consolidating; a move above $3,337.50 could trigger new buy signals. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Michalis Efthymiou HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Back in the early 2000s, Netflix mailed DVDs to subscribers.   It wasn’t sexy—but it was smart. No late fees. No driving to Blockbuster.   People subscribed because they were lazy. Investors bought the stock because they realized everyone else is lazy too.   Those who saw the future in that red envelope? They could’ve caught a 10,000%+ move.   Another story…   Back in the mid-2000s, Amazon launched Prime.   It wasn’t flashy—but it was fast.   Free two-day shipping. No minimums. No hassle.   People subscribed because they were impatient. Investors bought the stock because they realized everyone hates waiting.   Those who saw the future in that speedy little yellow button? They could’ve caught another 10,000%+ move.   Finally…   Back in 2011, Bitcoin was trading under $10.   It wasn’t regulated—but it worked.   No bank. No middleman. Just wallet to wallet.   People used it to send money. Investors bought it because they saw the potential.   Those who saw something glimmering in that strange orange coin? They could’ve caught a 100,000%+ move.   The people who made those calls weren’t fortune tellers. They just noticed something simple before others did.   A better way. A quiet shift. A small edge. An asymmetric bet.   The red envelope fixed late fees. The yellow button fixed waiting. The orange coin gave billions a choice.   Of course, these types of gains are rare. And they happen only once in a blue moon. That’s exactly why it’s important to notice when the conditions start to look familiar.   Not after the move. Not once it's on CNBC. But in the quiet build-up— before the surface breaks.   Enter the Blue Button Please read more here: https://altucherconfidential.com/posts/netflix-amazon-bitcoin-blue  Profits from free accurate cryptos signals: https://www.predictmag.com/ 
    • What These Attacks Look Like There are several ways you could get hacked. And the threats compound by the day.   Here’s a quick rundown:   Phishing: Fake emails from your “bank.” Click the link, give your password—game over.   Ransomware: Malware that locks your files and demands crypto. Pay up, or it’s gone.   DDoS: Overwhelm a website with traffic until it crashes. Like 10,000 bots blocking the door. Often used by nations.   Man-in-the-Middle: Hackers intercept your messages on public WiFi and read or change them.   Social Engineering: Hackers pose as IT or drop infected USB drives labeled “Payroll.”   You don’t need to be “important” to be a target.   You just need to be online.   What You Can Do (Without Buying a Bunker) You don’t have to be tech-savvy.   You just need to stop being low-hanging fruit.   Here’s how:   Use a YubiKey (physical passkey device) or Authenticator app – Ditch text message 2FA. SIM swaps are real. Hackers often have people on the inside at telecom companies.   Use a password manager (with Yubikey) – One unique password per account. Stop using your dog’s name.   Update your devices – Those annoying updates patch real security holes. Use them.   Back up your files – If ransomware hits, you don’t want your important documents held hostage.   Avoid public WiFi for sensitive stuff – Or use a VPN.   Think before you click – Emails that feel “urgent” are often fake. Go to the websites manually for confirmation.   Consider Starlink in case the internet goes down – I think it’s time for me to make the leap. Don’t Panic. Prepare. (Then Invest.)   I spent an hour in that basement bar reading about cyberattacks—and watching real-world systems fall apart like dominos.   The internet going down used to be an inconvenience. Now, it’s a warning.   Cyberwar isn’t coming. It’s here.   And the next time your internet goes out, it might not just be your router.   Don’t panic. Prepare.   And maybe keep a backup plan in your back pocket. Like a local basement bar with good bourbon—and working WiFi.   As usual, we’re on the lookout for more opportunities in cybersecurity. Stay tuned.   Author: Chris Campbell (AltucherConfidential) Profits from free accurate cryptos signals: https://www.predictmag.com/   
    • DUMBSHELL:  re the automation of corruption ---  200,000 "Science Papers" in academic journal database PubMed may have been AI-generated with errors, hallucinations and false sourcing 
    • Does any crypto exchanges get banned in your country? How's about other as Bybit, Kraken, MEXC, OKX?
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.