Mean reversion strategy in Indian markets

Abstract

The motive of every rational trader in a financial market would be to make profits out of every trade. Traders can make both long term as well as short term trades. Our objective of this study is to devise a strategy that can be adopted in short term trades and make profits in the maximum number of trades while restricting the losses to the minimum. It is a general belief that only value investors make money in the market. But we believe that even day traders can by adopting this strategy. We did a critical analysis of the performance of stocks across different sectors, capitalization brackets and time periods and backtested this strategy to ascertain the reliability.