Which of the following describes the basic exit strategy for mean reversion using momentum?

The basic exit strategy for mean reversion using momentum focuses on returning to a point of neutrality, which is indicated by the momentum crossing the zero line. This strategy operates under the premise that price movements are likely to revert to their mean, and the zero line serves as a benchmark. When momentum crosses the zero line, it suggests that the prevailing trend is losing strength, signaling a potential change from an upward momentum to a downward momentum (or vice versa).

This strategy emphasizes the idea of mean reversion, where traders look for correction towards a historical average after a significant price movement. If the momentum has been positive and crosses down below zero, it indicates a potential opportunity to exit long positions, while a crossover from negative to positive can signal an entry point. By waiting for momentum to cross the zero line as an exit signal, traders align their strategy with the fundamental concept of mean reversion.

In contrast, other options involve different thresholds or zones that do not align as closely with the mean reversion strategy. For instance, exiting when momentum crosses one standard deviation beyond the zero line or enters the opposite zone may not necessarily signify a return to the mean but rather an extreme condition, which can be more speculative. Therefore, crossing the zero line is the most