I am studying various swing trading strategy and I am curious as to whether anyone employs the stop and reverse technique to their trading? If so, is it a good idea how does one properly use it? Anyone have success with it? --MIKE
I use it on my entry but not the exit. My entry is such that - as I saw it posted the other day - the price is at a point of inflection. Let's just say that in reality the price has returned to the mean and now it is time for it to deviate from the mean. Usually, I have a good idea which way, but not necessarily. And I really don't care because I know it is going to deviate from the mean one way or the other. I use the mean as the entry, so if it crosses the mean the next day I reverse.
I use a stop and reverse as one element of my swing strategy. In the first 24 hours of taking a new long or new short position, the market is most likely to show you a head fake. The trend appears to have reversed and then continues in the primary direction again. When the market does this I reverse straight from long to short or short to long. But only during the first 24 hours of a new trade. If Im in the trade longer than that I use a normal exit. Runningbear