Trading Mean Reversion with Kalman Filters #shorts

Added: 2026-05-23

[00:00:00]I find often times we will explore a variety of different strategies and models, but very rarely do we actually discuss the implications in our decision-making in the live markets. And that's exactly the goal of this series and exactly what you see here in front of me. This is a Kalman filter trading system that aims to implement this mean reversion trading strategy in practice. What we're going to do today is talk about theoretically what mean reversion should look like.

[00:00:30]We're going to start in the classroom.

[00:00:32]We'll talk about the Ornstein-Uhlenbeck stochastic process, this idea of trading mean reversion, what it should look like for your equity curve, and then we will branch out to reality. We'll talk about non-stationarity, this idea that there is no long-term mean, and we'll talk about the implications of the Kalman filter to aid in solving this problem.