IU Mean Reversion System

DESCRIPTION
The IU Mean Reversion System is a dynamic mean reversion-based trading framework designed to identify optimal reversal zones using a smoothed mean and a volatility-adjusted band. This system captures price extremes by combining exponential and running moving averages with the Average True Range (ATR), effectively identifying overextended price action that is likely to revert back to its mean. It provides precise long and short entries with corresponding exit conditions, making it ideal for range-bound markets or phases of low volatility.

USER INPUTS :
Mean Length – Controls the smoothness of the mean; default is 9.
ATR Length – Defines the lookback period for ATR-based band calculation; default is 100.
Multiplier – Determines how wide the upper and lower bands are from the mean; default is 3.

LONG CONDITION :
A long entry is triggered when the closing price crosses above the lower band, indicating a potential upward mean reversion.
A position is taken only if there is no active long position already.

SHORT CONDITION :
A short entry is triggered when the closing price crosses below the upper band, signaling a potential downward mean reversion.
A position is taken only if there is no active short position already.

LONG EXIT :
A long position exits when the high price crosses above the mean, implying that price has reverted back to its average and may no longer offer favorable long risk-reward.

SHORT EXIT :
A short position exits when the low price crosses below the mean, indicating the mean reversion has occurred and the downside opportunity has likely played out.

WHY IT IS UNIQUE:
Uses a double smoothing approach (EMA + RMA) to define a stable mean, reducing noise and false signals.
Adapts dynamically to volatility using ATR-based bands, allowing it to handle different market conditions effectively.
Implements a state-aware entry system using persistent variables, avoiding redundant entries and improving clarity.
The logic is clear, concise, and modular, making it easy to modify or integrate with other systems.

HOW USER CAN BENEFIT FROM IT :
Traders can easily identify reversion opportunities in sideways or mean-reverting environments.
Entry and exit points are visually labeled on the chart, aiding in clarity and trade review.
Helps maintain discipline and consistency by using a rule-based framework instead of subjective judgment.
Can be combined with other trend filters, momentum indicators, or higher time frame context for enhanced results.