JXMJXRS - Mean Reversion Bands Tool

This indicator highlights when price is likely overextended and may revert back toward its average. It does this by plotting a central mean (EMA, SMA, or VWAP) with dynamic bands based on either standard deviation or ATR. These bands help show how far price has moved from normal levels.

When price moves beyond the outer bands, the background highlights in red or green to signal possible exhaustion. An optional setting allows the highlight to trigger only if the full candle body breaks beyond the band, helping reduce noise from small spikes or wicks.

The inner bands show more moderate overextensions, while the outer bands focus on stronger, less frequent moves. This makes the tool useful in both ranging and trending environments.

The indicator also includes a hidden oscillator that measures how far price is from the mean in standardized units. It stays off by default but can be enabled by advanced users if needed.

This tool works best on higher timeframes, such as the daily chart. It is not a buy or sell signal, but a way to add context and filter low-quality setups by focusing only on significant price extensions.

A red background appears when price closes significantly above the upper volatility band. This suggests that price is stretched far above its normal range and may be entering an overbought or exhausted state. A green background appears when price closes significantly below the lower volatility band, indicating a potential oversold condition. These zones highlight areas where a price reversion or slowdown may be more likely based on statistical extremes.