Prices move in a wave like fashion, moving back and forth following a broader trend. While doing so, it often revolves around a mean. It might move across or bounce off the mean. Mean reversion systems are designed to exploit this tendency.
@ alok310 what do you think of Pivot Points ? is it same as mean reversion ?
Pivot Points are not commonly used for mean reversion but considering the fact that the extreme pivots i.e R3 and S3 are considered overbought and oversold levels, a mean reversion strategy can be developed incorporating pivot points.