Trend Trading vs Mean Reversion Strategies – Which is Better? πŸ“ˆ


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 type of strategies like your candlestick patterns and not say you have to do the program of course you know you’ve got your own strategies but if you are on the programming do see some of the strategies then that is the kind of 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

9 Replies to “Trend Trading vs Mean Reversion Strategies – Which is Better? πŸ“ˆ”

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  2. Agree 100%. I'm just starting to learn trading & I've been paper trading for a few months, and there are loads more mean reversion-type opportunities than there are pure trend-following opportunities. I'm developing a strategy for both, like you mentioned, because I want to be able to capitalize on both types of moves. Thanks for all of your great content!

  3. I like to trade mean reversion because there`s more structure. Targets and entry point are more obvious than in trending environment.

  4. HTF mean reversion / ranges / channels are built from LTF trends, so one can always find some action of both kinds on some timeframe until one hits a limit, where the ratio of reward versus combined SL+spread+commission is personally unacceptable for the overall strategy and performance record.

    I struggled to make mean reversion work earlier. Then I learned a way to get scale into trends starting early. From there, I worked back to mean reversions that help me leg into HTF trends. It sounds stupid to say now, but it took me a long time as a beginner to learn how to mean revert WITH trends instead of counter-trend.

  5. You give lots of great content and your videos aren’t getting the views they deserve. I recently subscribed and I’m watching your most recent uploads. Can you please give online resources or book titles where I can learn mean reversion strategies/setups for stocks? Thanks a lot.

  6. it would be great if Mark could post some live scalping trades with the entry, stop and targets eg the dax london open or dow us open.

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