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FreeIndicators·ThinkorSwim

Reversion to 50-Day SMA

Distance-from-mean signal for snap-back trades.

How to install in ThinkorSwim

  1. In ThinkorSwim, open a chart, then go to Studies → Edit Studies.
  2. Click Create, clear the editor, and paste the code.
  3. Name it, click Apply, then OK, and it draws on your chart.

How to Use — WeTradePro Reversion To 50-SMA

Plots how far (in %) price has stretched from its 50-SMA, with fade bands that flag over-extension. Educational, not advice.

What it is (one line)

A mean-reversion oscillator showing the percent distance of price from the 50-period SMA, with ±bands — when price stretches too far from the average, a snap-back toward it is the higher-odds path.

Who it's for & best timeframe

Trader typeHow you use itBest timeframeRecommended setting
Day traderFlag intraday over-extension from the 50-SMA for fade scalps5-min – 15-minpctBand 1.5–2.5
Swing traderBest fit — buy pullbacks toward the rising 50-SMA, fade vertical extensionsDailysmaLength 50, pctBand 5.0
Position traderSpot stretched weekly moves likely to consolidate back to the averageWeeklypctBand 8–12

Best overall: Daily, `pctBand 5%`. Calibrate the band per symbol — high-beta names need wider bands than slow ETFs.

What you see (lower panel below price)

  • Histogram: % distance of price from the 50-SMA. Cyan above zero, magenta below; turns red/green when at/beyond a band.
  • Gray dashed zero: price = 50-SMA.
  • Red dashed band (+%): stretched above — over-extended long, fade-short zone.
  • Green dashed band (−%): stretched below — over-extended short, fade-long zone.
  • Dots: red = crossing back below the upper band; green = crossing back above the lower band.
  • Label: live % distance.

How to trade it (the core play)

  1. Find the over-extension — histogram reaches a band.
  2. Enter on the dot (cross back inside) in the direction of reversion.
  3. In an uptrend, prefer green dots — buying the snap back to a rising 50-SMA is the classic pullback entry.
  4. Stop beyond the price extreme that made the stretch.
  5. Target: the zero line (the 50-SMA itself).

Settings (inputs)

  • smaLength (50) — the moving average price reverts to. 50 is the institutional standard.
  • pctBand (5.0) — the % distance that counts as over-extended. Tune per symbol — wider for volatile names.
  • showSignals (yes) — toggle the reversion dots.

Best on

  • Trending stocks and ETFs that respect the 50-SMA on pullbacks: AAPL, MSFT, SPY, QQQ, sector ETFs.

Common mistakes

  • Using one `pctBand` for everything — 5% is a lot for SPY and nothing for a small-cap. Calibrate.
  • Fading a parabolic move too early — over-extended can get more over-extended. Wait for the cross-back dot.
  • Ignoring trend direction — fade longs in uptrends, fade shorts in downtrends; don't fight the average's slope.
  • Treating zero as a hard target — it's a magnet, not a guarantee.

Video script outline (for your WeTradePro tutorial)

  1. Hook: "Price always comes home to the 50. Measure how far it's wandered."
  2. Show a vertical run hitting the upper band, then the snap back to the SMA.
  3. Why % distance (not raw price) makes it comparable across symbols.
  4. Calibrating pctBand per name.
  5. The pullback-to-rising-50 long: the green dot.
  6. Target = the moving average = the zero line.
  7. Recap + "import link in description."

Educational analysis, not financial advice.

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