Reverse the trade to get back loss

[Quanto]

Recently I was hit by the idea of "reversing the trade to get back loss" or "when you get stopped out it's the best time to reverse your trade"

Personally I had bad experience with such a trading strategy, it is not uncommon that the market would stop you out on high/low tick before going back to your original direction. But some trader seems to be able to improve daily win rate by doing it, and I read some Market wizard featured traders have used this strategy as well.

So often you use the reverse key, and is that part of your strategy? In what condition do you reverse your trade or is there any filters and rules you have for reversing your trade.

It's a bad idea. Here the reason & the rationale:
One should always have a fresh list of trade candidates. This list should be sorted (scored & ranked). One should trade from that list only, not do any "reversing the trade". B/c by that you turn yourself 180 degrees around. This is not healthy One should keep direction and specialize in one direction only...

 

[ondafringe]

It's a bad idea. Here the reason & the rationale:

One should always have a fresh list of trade candidates. This list should be sorted (scored & ranked). One should trade from that list only, not do any "reversing the trade". B/c by that you turn yourself 180 degrees around. This is not healthy One should keep direction and specialize in one direction only...

For *most* people, that is probably good advice... but there are some people who can make it work.

 

[murray t turtle]

Actually this is one of the thread that hit me. I actually posted before, I personally known a businessman who trades just ORB. after tons of research he had done, the only way to play it successfully is by adding size on every loss, but taking huge loss from time to time is inevitable, And I mean so huge, that most retail would not be able to handle such drawndown because you still have bills to pay biweekly or whatever. So it would cool that the OB himself could explain how he keeps a low drawdown.

%%
OK; best way to go bankrupt.
Even faster way bankrupt is do that leVeraged shorts in SPY or ES;
Almost as good to bankrupt is leverage dumb down that on single stocks \oops GM + DAL went bankrupt.
WHEN the trend main changes , best way to max loss is do that dumb down add on; able to afford huge loss is not good money management
Bear Stearns + LEH went bankrupt with too much leverage, so non retail gets bankrupt doing stupid stuff like that also .
AS if his tons of research is >> than BEAR or LEH. ??
He maybe better than DAL + GM LOL

 

[hilmy83]

I believe @hilmy83 uses a stop-and-reverse strategy for his automated system.
https://www.elitetrader.com/et/threads/index-futures-automation.368144/

I just pulled a strategy out of my ass and automated it. So far it's performing.

You have to use SnR on volatility setup.

 

[murray t turtle]

For *most* people, that is probably good advice... but there are some people who can make it work.

%%
Market makers + specialists reverse + profit all the time;
so few bear funds last long + profit.
But polar bears, black bears , buck deer, bighorn sheep, bull elephants / TX longhorns are doing fine , so exceptions to any rule.

 

[BKR88]

Actually this is one of the thread that hit me. I actually posted before, I personally known a businessman who trades just ORB. after tons of research he had done, the only way to play it successfully is by adding size on every loss, but taking huge loss from time to time is inevitable, And I mean so huge, that most retail would not be able to handle such drawndown because you still have bills to pay biweekly or whatever. So it would cool that the OB himself could explain how he keeps a low drawdown.

Some traders that use stop-and-reverse add to the position each time. Theory is that eventually you get the direction correct. Better have plenty spare margin though with this strategy. I wouldn't recommend it. For example, trade in the direction of the 50 ema but stop-and-reverse every time you get a full candle closed on the opposite side of the moving average. Should work in a trending market but could get chopped in a ranging market.

I think a better idea would be to use something like VWAP/Bollinger Bands/Keltner Channel/etc..
With BB or KC, maybe use multiple bands. VWAP already has multiple bands. I don't have a strategy about how/when the stop-and-reverse would trip.

 

[Big AAPL]

Revenge based trading rarely works
sit on your hands until the next SYSTEM BASED opportunity presents itself

 

[hilmy83]

Some traders that use stop-and-reverse add to the position each time. Theory is that eventually you get the direction correct. Better have plenty spare margin though with this strategy. I wouldn't recommend it. For example, trade in the direction of the 50 ema but stop-and-reverse every time you get a full candle closed on the opposite side of the moving average. Should work in a trending market but could get chopped in a ranging market.

I think a better idea would be to use something like VWAP/Bollinger Bands/Keltner Channel/etc..
With BB or KC, maybe use multiple bands. VWAP already has multiple bands. I don't have a strategy about how/when the stop-and-reverse would trip.

You do run the risk of diminishing momentum if you do it too long in a session. So at some point, you have to take max loss. That's where the edge is I think, knowing when and where to exit and resume the streak again.

 

[Bad_Badness]

It has to have a reason why. Not simply you hit a stop. The market does not care where your entry, stop, reverse reentry are. You are too small.

This is pretty simple concept but people ignore it.

If you build the strategy to accommodate it, or around it, sure, but I would recommend you work on getting a simple direction signal, entry, and exit figured out first. No need for "master" tactics, when you are still an apprentice.

 

[doubledoubledoublecup]

%%
OK; best way to go bankrupt.
Even faster way bankrupt is do that leVeraged shorts in SPY or ES;
Almost as good to bankrupt is leverage dumb down that on single stocks \oops GM + DAL went bankrupt.
WHEN the trend main changes , best way to max loss is do that dumb down add on; able to afford huge loss is not good money management
Bear Stearns + LEH went bankrupt with too much leverage, so non retail gets bankrupt doing stupid stuff like that also .
AS if his tons of research is >> than BEAR or LEH. ??
He maybe better than DAL + GM LOL

That's exactly why I did not think reversing your stop is not a good strategy to use, taking huge loss is the large thing you want for trader growing his account. I guess if you trade small enough and have unlimited amount of bullets, it could work. But he did have the discipline to stop trading after he reached certain amount of loss. So I guess that's he's holy grill. Just imagine making 6 figures and just spent it on a nice holiday and the next losing day come and you lost all of it. I can't trade like that since I have bunch of bills to pay every month.