Taking a break is better than "death by 1000 cuts" though . I wouldn't be disappointed. Better to come back with a fresh mind.
There is nothing wrong with either strategy. In low-volatility environments use trend following. In high-volatility use mean reversion. I learned the weaknesses of each strategy the hard way. Right now you have to use a combination of both because even though volatility is high on the daily charts it tends to be low for periods of time intra-day. Right now I'm using a combo of trend following long and mean reversion/scaling short but stand ready to flip that coin when needed. Success depends on your ability to adapt to changing market conditions.
Very Nice. I have tried similar strategy trading ES.I do find it is very high probability trading strategy. the downside is you have to look at screen all the time, not for lazy person. When my limit order is executed, my pre-defined stop loss and profit taking target is placed automatically.This gives you some protection.
Your time frames are too far apart. Mean reversion strategies work best when you compare close time frames such as the 5's and 1's, for example. In your case you are comparing the 5's and dailies, which leaves too much unexamined data. If you do something like the 5's and 15's or 60's and dailies you'll get better results. Mean reversion does work but you need other tools to support it. In the current market I am using a mean reversion/scaling strategy but only on the short side at the moment. It wasn't long ago that I was doing MR only on the long side. Back in 2008 I was using it in both directions and not doing any trend trading at all. Conditions are constantly changing. Adapt, adapt, adapt.
Hey guys, This may be common sense, but I am under the impression that mean reversion beats trends in some environments and vice versa and in fact when one strategy works, the other fails. Good example, I had a friend who was making money trading forex, with mean reversion, but after the US markets closed. I bet if you used a breakout or trend system then, you would lose. Likewise, he lost money whenever he used the system during the us trading hours. I think most traders have a tendency to make money at certain times during the day. Well, actually, their system does. Well then, wouldn't the "opposite" type of system work when their system doesn't??? -steps
This thread has become too varied and not really about mean reversion trading per se, people are talking about pairs trading and arbitrage. Which is not the same thing as mean reversion trading.