Most of us understand buying low and selling high is a way to make money. In order to do that, you must be able to make a correct judgement on the direction of the asset that you are buying. You lose money when the asset price goes in the opposite direction of your anticipation. Besides the usual directional strategy, there are other non-directional methods that traders and hedge funds employ to profit from the market. There are many terms to describe such methods but I will just say that they are all anticipating a convergence in prices or a reversion to the mean. We learn statistics whereby the mean is the average of a series of numbers. For example, you have 10 days of prices of the same stock; you get the average price for the 10 days by dividing the sum of prices by 10. This is what we ......