Mean Reversion Strategy Journal

[deaddog]

Fair enough, again up to each individual tastes if you don't mind sitting in cash for a long time,

Cash is pretty well a risk free position.

Better to be in cash when the market is going up than in stocks when the market is going down.

Maybe it's old age, but FOMO is no longer a motivator.

 

[toc]

Seems like good stuff.........will be nice to stay tuned in !!

 

[StockChartist]

Seems like good stuff.........will be nice to stay tuned in !!

Thank you for your support, will do my best to stay consistent and keep this thread updated.

Looks like stocks are going to be on sale for Black Friday too, Russell futures were just down 5% in overnight trading, market is nervous about the new covid variant out of South Africa.

 

[StockChartist]

Opened two new trades today, decided to make some contrarian plays as I think this reaction from the new covid variant concern is a bit overdone, so entered buy orders for both $RCL and $DAL which were filled on the open, both stocks already met all my technical requirements yesterday for a trade and with the gap down they're both quite below the 50 day SMA. Expecting further volatility and possibly a few weeks or so before coming back to the mean. Portfolio now has 15 positions currently open (my maximum) so no new buys until a position hits a target and is closed.

 

[Overnight]

Opened two new trades today, decided to make some contrarian plays as I think this reaction from the new covid variant concern is a bit overdone...

Today was DEFINITELY an over-reaction, but not sure if now was the time to jump back into travel stocks. Seems there will be a bit more downside until the Omicron panic has left the building.

But the charts you posted look promising over the mid-term, nearing or at bottoms.

 

[StockChartist]

Today was DEFINITELY an over-reaction, but not sure if now was the time to jump back into travel stocks. Seems there will be a bit more downside until the Omicron panic has left the building.

But the charts you posted look promising over the mid-term, nearing or at bottoms.

Yes you may be right, my strategy is always early to enter on the divergence to be able to always catch the convergence back to the mean, so most of my trades will go against me before coming back.

 

[deaddog]

Yes you may be right, my strategy is always early to enter on the divergence to be able to always catch the convergence back to the mean, so most of my trades will go against me before coming back.

As your trades go against you doesn't your exit line also drop?
It looks like some kind of moving average.

 

[StockChartist]

As your trades go against you doesn't your exit line also drop?
It looks like some kind of moving average.

Yes it's the 50 day WMA so it adjusts everyday using the new closing price, that's what I refer to as the "mean" and exit 1 tick above that.

 

[deaddog]

Yes it's the 50 day WMA so it adjusts everyday using the new closing price, that's what I refer to as the "mean" and exit 1 tick above that.

OK I don't mean to be negative here but to protect my capital I have to look at worse case scenarios.

With a weighted MA the faster a stock drops the faster your exit signal will drop. How often does a stock exit at a loss?

 

[StockChartist]

OK I don't mean to be negative here but to protect my capital I have to look at worse case scenarios.

With a weighted MA the faster a stock drops the faster your exit signal will drop. How often does a stock exit at a loss?

You can check the back tests from 2008-2021 in my 1st post which shows an average win rate around 75%, the MA can still drop and the trade results in a profit, look at this chart below of $WMT as an example, you can see the MA drop and the trade go into drawdown before coming back to close at a profit.