in this video traders we will be talking about
mean reversion versus trending strategies
stay tuned
hey guys warm welcome to you alright so
when you are starting out for when
you're kind of finding your feet you're
like okay well I want a strategy that
works I want to get something that I
really can get my teeth stuck into and
very often the decision comes down about wanting
to be trading a trend order or wanting to
trade mean reversion
Mean reversion being a stretched market that
stretches to the upside and is about to move back to a
mean and that could be of a swing
trading might be a moving average it
might be a breakout point like a support
level it might be if you're trading
intraday of the VWAP and open a prior
level something like that so it's kind
of a stretch and a pullback you
mentioned the Bollinger Band trade very
much mean reversion to type trade
setting at the upper Bollinger Band
buying the lower Bollinger Band closing
how in the middle trend tuck trade is
waiting for that momentum and buying a
pullback and a continuation now the pros
of either of both others on a trend a
the profits can be substantial if you
have that momentum ignition you catch it
early and you get on it then you can get
many many many times your risk because
if you've got a great entry you're
capping the wrist you've got a sweet
spot you find a sweet spot and you can
let it run then fantastic trades the
downside is with the trending trades is
that we don't often get trend days we
don't often get trends now I'm talking
more from a shorter term perspective
swing trading it's slightly different
but if we're talking a short term
perspective how many trend days do we
get not that many guys we probably get
two or three if that in a month real
trend days like opening at the low
closing height and high closing low
obviously depends on the season now I've
seen it depends on what's going on the
global news flow etc but that's a rough
estimate but really what we can say is
most of time we're getting mean
reversion now I like trading both
because I like the
fact if you got a trend they leave it
just wait and come back and then you've
got you know you don't know where it's
going to go if your thesis is right you
could have a monster day
but I like Mira version because that's
very much seen where the turn is and
that is something that happens regularly
you know most days we're going to get
probes to highs pros to lows probes to
higher high a prior high should I say
prior lows etc fails rotations you know
we get that and as a trade intraday
trader as something you can really grab
onto so and it's these similars robots
or swing traders I know that you get
markets to do trend but very often you
know markets will sit in ranges for a
long time because something like Tesla
for example yes you've got many trends
there but very much has been kind of
mean reverting up looking like it's
gonna break the highs coming back down
again you know it's very much been a
mean reverting traders perfect scenario
so anyway that's the point the point
guys is this if you are choosing between
the two then mean reversion is probably
the one you want to pick now there is a
personality aspect in this I understand
that and what kind of not going to go
into that at this point now but from an
operational perspective purely of ok
what should I get good at what should be
my first step on my kind of real
specialist area in my opinion it should
be mean reversion now it should be a
point where you get to you should get to
a point where you have multiple
strategies that you plug into the right
kind of day because that really then
allows you to capitalize on stuff but if
it you was kind of just trying to get an
expertise at something then forget about
the trends for now
because you want many iterations to
learn and the trouble is if you're
trading that's a trend SS assume you're
trading intraday trend days then you're
not going to get many of those we're
getting kind of to a month you've gotta
wait a long time to get that cycle of
learning and to get that repetition
where they feel trading mean reversion
you're trying to find those turning
points you're gonna get many of those
per week you know my of course there's
gonna be days with nothing's happening
and you stay away from it but you're
gonna get many opportunities to put your
strategies to the test
you're gonna find out the commonality
between how why price turns where it
turns you know what the volumes looking
like what time of day you start to put
this together so I would say you know
this is kind of immerse sponsor to a
couple of questions of ok I'm trying to
find a strategy focus on the mean
reversion strategies folk
on the type of things that look for the
low and high of the day and start from
there
so to start from what is the higher the
day got in common with the prior high
the prior high the pro height and C and
then just start to work back from that
what's the lower the day now
not seeing gonna get the high the day
Lalo's day every day but if that's the
major turning point which obviously is a
high the day's the highest it's been in
the day Louis the lowest it's been in a
day so if that's a major turning point
what commonalities are there in that
market in the high or low of the day
print off your chart whatever you to do
and see if there is some kind of theme
that runs through the rest of the week
or the rest of the month or whatever it
may be and then you can start to piece
together a strategy and then you can
start to add some of the price action
things you're looking for but other
things that you might look for are in
your just your standard candlestick
reversals a double top a head and
shoulders something that's textbook but
in the right condition in the right
environment so mean reversion Trump's
trending all day every day purely
because of the frequency of a mean
reversion type day
trend dating is good and it can get
multiple profits but if you are trying
to move forward trying to get learn and
improve then mini versions the way to
focus because purely because of the
number of iterations you're going to get
a number of a frequency of occurrence in
should I say you're going to get you're
gonna get more and more and more
learning learning learning become better
and better and better in a short period
of time and then you can start adding in
the trend a type trade alright guys take
care get your risk managed whatever your
training is see the next one bye bye
you