what is the difference between trend following and mean reversion 
trend following and mean reversion operate on different premises the objective of trend following is to capitalize on assets moving strongly in a particular direction the objective of mean reversion is to capitalize on price deviations from an established mean or average the bottom linemean reversion is a financial theory that says asset prices will tend to revert to their historical mean or average over time it serves as the backbone for various trading strategies across multiple asset classes including stocks forex and commodities investors commonly use indicators like moving averages rsi and bollinger bands to identify mean reverting opportunities these indicators help pinpoint overvalued or undervalued assets providing potential entry and exit points the strategy can be applied across different time periods from intraday to long term and is particularly effective in range bound or sideways markets however it s crucial for traders and investors to incorporate robust risk management techniques and be mindful of transaction costs given the frequently traded nature of mean reversion strategies 