Range mean reversion
Tests whether qualified boundary excursions revert toward a range midpoint.
Keep the chart simple
What needs to be in place first
- Minimum two prior contacts per boundary
- Range width comfortably exceeds all-in costs
- Trend-strength filter remains below its declared threshold
See range mean reversion from both sides
Choose a direction and follow the chart from setup to entry, stop and planned exit. The method stays the same; only the directional comparisons reverse.
Entry is above the trigger, invalidation is below the setup and a profit exit is above the entry.
- EEntryLONG ENTRY — next H1 open
- SStop / risk limitSTOP — excursion − 0.20 ATR(14)
- TTargetTARGET — frozen midpoint
This H1 teaching chart freezes a valid 24-bar range before the lower excursion. The long entry follows a completed reclaim, the stop sits 0.20 ATR(14) beyond the excursion and the fixed midpoint is the target.
NO TRADE when ADX(14) reaches 20, the six-bar frozen range has expired, a major event is inside the hold, or midpoint room is below 1.5R.Check the market first
The frozen range satisfies its width and four-contact rules and ADX(14) is below 20 on the signal close.
Wait for the entry rule
Enter at the next H1 open after the first qualifying close back inside the frozen range.
Place the stop before entry
Place the stop 0.20 × ATR(14) beyond the excursion extreme and size to 0.50% equity risk, rounded down to 0.01 lot.
Know how the trade ends
Exit at the frozen range midpoint. If neither stop nor midpoint trades, exit after eight completed H1 bars.
Worked example: 24-bar range reclaim to midpoint
This version of Range mean reversion chooses one answer for every decision so you can repeat it. Treat the settings as a starting point to test, not as proven or recommended parameters.
EUR/USD H1 UTC candles; both directions; no more than one open trade.
The range is constructed from the preceding 24 completed bars and is frozen for the next six bars.
All indicator and price tests use completed candles.
Draw the 24-bar high, low and arithmetic midpoint; range width must be 0.8 to 2.5 × ATR(14).
Add RSI(14) on close, Wilder ADX(14), and Wilder ATR(14).
A boundary contact is a high/low within 0.10 × ATR of the edge; require two contacts at each edge separated by at least three bars.
Give every tool one job
Direction, timing, volatility and risk are different questions. This stack assigns them rather than asking one indicator to do everything.
Defines location and midpoint before the excursion; future contacts cannot improve it.
Rejects stronger directional states; it does not time the entry.
Describes the excursion's momentum extreme after range eligibility is established.
Scales range width, excursion tolerance and the stop buffer.
- The frozen range satisfies its width and four-contact rules and ADX(14) is below 20 on the signal close.
- Long: price trades below the lower edge by no more than 0.35 × ATR, RSI is below 35 during the excursion, then closes back inside; reverse at the upper edge with RSI above 65.
- Distance from next-open entry to the frozen midpoint must be at least 1.5 times entry-to-stop distance.
Enter at the next H1 open after the first qualifying close back inside the frozen range.
Place the stop 0.20 × ATR(14) beyond the excursion extreme and size to 0.50% equity risk, rounded down to 0.01 lot.
Exit at the frozen range midpoint. If neither stop nor midpoint trades, exit after eight completed H1 bars.
Cancel if no reclaim occurs on the excursion bar, ADX reaches 20, the frozen range expires after six bars, or a high-impact event falls within the planned eight-bar hold.
Use a constant 1.0-pip spread and 0.1-pip adverse slippage on entry and exit; no commission or rollover is included because the canonical hold is limited to eight hours.
Move through the chart one decision at a time
- Bar −6: freeze range
The prior 24 bars have a low of 1.0800, high of 1.0860 and midpoint 1.0830, with two separated contacts at each edge.
- Bar −2: verify state
ATR(14) is 0.0040, so the 60-pip width is 1.5 ATR; ADX(14) is 17 and the range remains eligible.
- Bar −1: observe reclaim
Price trades to 1.0792, RSI reaches 31, then closes at 1.0804. The 8-pip excursion is within the 14-pip limit.
- Bar 0: enter
Next open is 1.0805. Stop is 0.20 ATR below 1.0792, or 1.0784; risk is 21 pips before frozen costs.
- Bar 0: verify room
The midpoint is 25 pips above entry, which is less than 1.5 × 21 pips, so this numerical example is correctly rejected rather than forced into a trade.
- Next eligible sample
Repeat with a narrower 12-pip structural stop and at least 18 pips to midpoint; enter, hold the fixed midpoint and record stop, target or bar-eight time exit.
A rejected example
The worked 1.0805 example is a deliberate rejection: every visual condition passes, but available room is too small. This exposes why location alone is not a complete method.
Common variations
- Separate variant only: target the opposite range edge.
- Separate variant only: replace RSI with Stochastic(14,3,3).
- Separate variant only: use a failed-close-and-next-bar reclaim sequence instead of a same-bar reclaim.
Rebuild this method on the platform you use
The written rules work independently of the charting app. Match the same feed, timeframe, indicator settings and completed-candle timing before comparing results.
MT4
Manual rulesThe written rules can be followed manually. WickAtlas does not currently provide an automated strategy or trading bot.
MT4 technical analysisWickAtlas MT4 setup guideMT5
Manual rulesThe written rules can be followed manually. WickAtlas does not currently provide an automated strategy or trading bot.
MT4 and MT5 comparisonWickAtlas MT5 setup guideTradingView
Manual rulesThe written rules can be followed manually. WickAtlas does not currently provide an automated strategy or trading bot.
TradingView indicatorsWickAtlas TradingView guideTest on a demo account first. Platform access does not validate a strategy or make a result likely. Compare the platforms.
Keep every test organised.
The CSV gives you one place to record the setup, costs, execution, outcome and whether you followed your rules.
Download test-plan CSV ↓