It would be nice if some other mean reversion traders could post some trade descriptions (entries, stops, targets, final result) or chart of some trades for comparison.
I've seen RTM traders take some big hits. I avoid that using the RTM style I outlined here, because RTM is just one of several strategies I use. But if all you do is RTM and you use a fading/average down style, the big hits are just a cost of doing business, because if you're an experienced RTM trader, your win rate is usually 80-90%.
It would be interesting to get input here for setups that are especially successful vs setups that can really hurt the RTM trader.
For example it's not a good idea to fade a strong move off raised or lowered guidance, at least not on the day of the news. Guidance is what the smart money is basing investing decisions on and price will often go much farther up or down than you expect on the news day.
Strong moves based on rumor or hope are often some of the best RTM setups. An example is a day back in April when the for-profit education stocks all ran up like crazy because of some bit of news that might possibly affect something that wasn't set in stone in the first place. I don't remember the details but it was not news that had any real impact, it was news that inspired potential hope and those stocks gapped up and ran hard into the close. The next morning when the run up failed to continue, it was an excellent RTM trade, with price retracing the previous day's entire move and even dipping into the gap zone after that. I chose one of the priciest of those stocks (ESI), kept my size very small and had a nearly $700 gain.
I've seen RTM traders take some big hits. I avoid that using the RTM style I outlined here, because RTM is just one of several strategies I use. But if all you do is RTM and you use a fading/average down style, the big hits are just a cost of doing business, because if you're an experienced RTM trader, your win rate is usually 80-90%.
It would be interesting to get input here for setups that are especially successful vs setups that can really hurt the RTM trader.
For example it's not a good idea to fade a strong move off raised or lowered guidance, at least not on the day of the news. Guidance is what the smart money is basing investing decisions on and price will often go much farther up or down than you expect on the news day.
Strong moves based on rumor or hope are often some of the best RTM setups. An example is a day back in April when the for-profit education stocks all ran up like crazy because of some bit of news that might possibly affect something that wasn't set in stone in the first place. I don't remember the details but it was not news that had any real impact, it was news that inspired potential hope and those stocks gapped up and ran hard into the close. The next morning when the run up failed to continue, it was an excellent RTM trade, with price retracing the previous day's entire move and even dipping into the gap zone after that. I chose one of the priciest of those stocks (ESI), kept my size very small and had a nearly $700 gain.
(don't take it too seriously...)