Mean Reversion Index

The CandelaCharts - Mean Reversion Index is a powerful statistical oscillator designed to pinpoint historical extremes in an asset's price action.

Financial markets are inherently cyclical; prices expand away from their fundamental baseline, eventually snap back, and overextend in the opposite direction. By mathematically measuring the distance between current price and a long-term moving average, and then normalizing that distance using standard deviations (Z-Scores), this indicator helps traders and investors objectively identify periods of extreme undervaluation (capitulation) and overvaluation (euphoria).