Mean Reversion Trading With IV Metrics (By MC) - Mobile Friendly

This script is a comprehensive toolkit for traders who want to combine price mean reversion analysis with advanced volatility metrics, including Implied Volatility Rank (IVR), Implied/“Fair” Volatility projections, and real-time market volatility indicators. It is optimized for both desktop and mobile use, providing a detailed statistics table directly on the chart, and is suitable for stocks, ETFs, indices, and even paired asset analysis.

Key Features & How They Work Together

1. Mean Reversion Probability & Z-Score

• Mean Reversion Analysis: Calculates z-scores and statistical probabilities that the asset’s price will revert to its mean, using customizable lookback windows (e.g., 10-60 bars). This helps traders spot potentially overbought or oversold conditions.
  
• Strong & Moderate Signals: Highlights strong and moderate reversion opportunities based on user-defined probability thresholds, providing clear visual cues for timing entries and exits.
  

2. Paired Asset Correlation

• Pairs Trading Support: Allows comparison of two symbols (e.g., SPY vs TLT). It computes the ratio, rolling mean, standard deviation, and correlation, helping traders identify divergence/convergence opportunities in pairs trading.
  

3. Volatility Metrics & Projections

• Historical & Implied Volatility: Estimates implied volatility (IV) using historical price data, calculates IVR (the asset’s IV relative to its own history), and provides user-customized percentile bands (e.g., 20th/80th percentiles).
  

• Fair IV Calculation: Offers three methods to compute “fair” volatility:
  

  Market-Aware (relative to VIX/SPX HV)
  SMA of historical volatility
  SMA of VIX Traders can choose the method that best fits current market conditions.

• Future Projections: Projects IV, “Fair” IV, and IVR for a user-defined future period, giving insight into potential volatility trends.
  

4. Implied Move Range

• Implied Move Calculation: Shows the expected price range (upper/lower bounds) for the forecast period based on the current IV, making risk management and target setting more objective.
  
• Dynamic Labels: Automatically updates labels with the latest projected moves and bounds, keeping traders informed in real time.
  

5. Market Volatility Dashboard

• Broad Market Indicators: Displays real-time values and daily changes for VIX, VIX1D, VVIX, MOVE (bond volatility), GVZ (gold volatility), and OVX (oil volatility). Color-coded thresholds help traders gauge market stress across asset classes.
  
• Correlation to SPY: Shows how closely the asset moves with SPY, aiding in diversification and hedging decisions.
  

6. Performance Metrics

• Daily Move Analysis: Tracks today’s price move (absolute and percentage), average rises/falls, and the percentage of green/red days over a custom period.
  
• Trade Quality Assessment: Ranks trade opportunities (High/Moderate/Low/Very Low) based on mean reversion probability.
  

7. Highly Customizable Table

• Mobile Friendly: The stats table can be placed anywhere on the chart, toggled between compact/full/extra modes, and resized for readability on any device.
  
• Visual Cues: Color coding and dynamic labels make interpretation easy and fast.
  

8. Alert Conditions

• Built-in alerts for strong/moderate mean reversion, IV crossing above/below “Fair” IV, allowing proactive trade management.
  

9. VIX-Based Expected Move Bands

• Optionally plots ±1, 2, 3 standard deviation bands using VIX-based expected move, helping to visualize potential price extremes.
  

How These Features Help Traders

• Unified Trading Dashboard: All key mean reversion and volatility insights are available at a glance, reducing the need to switch between multiple indicators or screens.
  
  
• Informed Entries & Exits: By combining mean reversion probabilities, IV projections, and market volatility, traders can time trades more confidently and avoid false signals.
  
  
• Risk Management: The implied move bounds and volatility levels support realistic stop-loss and target setting, adapting dynamically to market conditions.
  
  
• Cross-Asset Awareness: Market-wide volatility metrics and asset correlation to SPY provide context, helping traders avoid surprises from macro shocks.
  
• Pairs Trading: Direct support for ratio and correlation analysis streamlines pairs strategies.
  
  
• Customization & Clarity: The flexible UI and color-coded stats make the tool accessible for both beginners and advanced users.
  

Mean Reversion, Correlation value & interpretation:

For Meant Reversion % Probability:
Lookback Period to use:
| Trading Horizon | Lookback Period (Length) | Rationale |
| 5–10 days | 10–20 bars | More sensitive, good for quick reversals |
| 10–20 days | 20–30 bars | Standard for short swing |
| 20–40 days | 40–60 bars | More stable mean for longer swing |

Interpretation Guide:

Only consider trades if Correlation ≥ 0.6 or Reversion % ≥ 75%.
Avoid trades with Reversion % < 20%.
Correlation and Reversion % together form a powerful trade quality filter.

| Reversion % | Correlation | Signal Strength | Action |
| ≥ 75% | ≥ 0.4 | High Probability | Consider full position |
| ≥ 50% | ≥ 0.6 | Moderate Probability | Trade with standard size |
| ≥ 75% | < 0.4 | Uncorrelated Edge | Trade small or hedge carefully |
| < 50% | Any | Weak | Avoid |
| Any | < 0.3 | Low Coherence | Avoid unless extreme Reversion |


| Correlation Value | Interpretation |
| +1.0 | Perfect positive correlation (price of both move in the same direction)|
| +0.7 to +0.9 | Strong positive correlation |
| +0.4 to +0.6 | Moderate positive correlation |
| 0 | No correlation (independent) |
| -0.4 to -0.6 | Moderate negative correlation |
| -0.7 to -0.9 | Strong negative correlation |
| -1.0 | Perfect negative correlation (price both move in the opposite direction)|


Summary:
This script empowers traders to navigate markets with a robust, data-driven approach, seamlessly blending mean reversion analytics with deep volatility insight—all in a mobile-friendly, customizable dashboard.


Disclaimer
This tool is for informational and educational purposes only. It does not provide financial advice or trading signals. Always do your own research and consult a professional before making investment decisions.