BEST Mean Reversion Indicator for Winning Trades

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Күн бұрын

Download FREE PDF GUIDE for this EASY TRADING STRATEGY here: www.thetransparenttrader.com/...
Discover how you can money trading rule based trading strategies. Let me show you the process I have developed in over 10 years trading:
Click this link to my trading school
trading-halls-of-knowledge.te...
In today’s video I am going to show you how to build a simple trading strategy that wins over 85% of the time. It trades off of the daily chart and has just two rules. If you are exploring mechanical based trading as a way to become consistently profitable or if you are looking for an additional strategy to your already mechanical trading portfolio then I think you’re going to like what I am about to show you.
I’ll show you the entry and exit signals over on my charting software and then some performance figures over the 13 years that I have tested the strategy on.
It uses Relative Strength Index Indicator to identify the signals. Much credit goes to Larry Connors and Cesar Alvarez for introducing me to this trading strategy. The strategy successfully takes advantage of the S&P 500’s Mean Reversion tendencies on the daily timeframe.
This is a follow up to a previous video on technical indicators. I touched on this strategy I am about to show you and I have been asked for more information. Well that’s what this video is for.
Watch the previous video here : www.thetransparenttrader.com/b...
Watch the video where I demonstrate the strategy. And I have also put together a PDF guide to using this strategy which you can download for free:
www.thetransparenttrader.com/r...
DISCLAIMER:
I am not a financial advisor and I am not offering you financial advice. I am not regulated in any way. The purpose of the content I provide is for educational purposes only.
Any information you receive is based on my own knowledge and experience in the financial markets and how you act on the information provided is your own responsibility.
I cannot be held responsible for any losses you may incur as a result of ideas taken from my content provided.

Пікірлер: 117

@philpreston6406 4 жыл бұрын

Thanks, my friend. Just proves, with the right mindset, money management, patience - trading can be rather simple. Our minds are often the PROBLEM!

@cleytoncabral8616 2 жыл бұрын

Very well spoken.

@cleytoncabral8616 2 жыл бұрын

I am in this busines since many years ago but I only started to be sucessful after I completed 40yo loll, meaning, after I started to be patient and discipilned. As I love day trading, I tried so many fancy/clever strategies but lack of patience and discipline kept me in the loop of winning-losing it all. For you youngsgter I recommend putting more effort on discipline and emotional control rather the strategy itself.

@davidgalea430 2 жыл бұрын

I love the simplicity of this strategy!

@ranggaputra7750 4 жыл бұрын

Thank you for sharing this technique, awesome! you rock, subscribed! ready to learn a lot on your channel. Cheers!

@snivesz32 3 жыл бұрын

Keep producing great content! 👍

@FilippoCordioli 2 жыл бұрын

Really good stuff. And thanks for sharing the multi language code (very helpful for us to program and replicate the strategy)

@jmoz 4 жыл бұрын

Thanks for sharing. In my backtesting, I found using the RSI as the closing trigger to be a better solution.

@TheTransparentTrader 4 жыл бұрын

Yes that also works well. Although I have found one to work better sometimes and the other another time..

@OneCreator87 5 жыл бұрын

Look awesome, going to test

@musicraftmenship4785 3 жыл бұрын

Utterly Incredible!

@TheTransparentTrader 6 жыл бұрын

Hope you like the video guys! Here's the Free PDF www.thetransparenttrader.com/rsi-mean-reversion-guide-pdf/ While Larry Connors didn't specify a STOP LOSS for this strategy, I have found 80 points works pretty well.

@gdydbjsiuxvsnsjdx Жыл бұрын

Pure gold.. Thank you

@tommylo2777 3 жыл бұрын

Transcribed your strategy into Trading View strategy and backtested. It worked up until 2018. From 2018 the drawback was really huge and put you back to where you were in 2nd year. With commission taken into account this strategy is not enough to be profitable. But yea thanks for the idea, still something worth trying

@samdonsalamon9414 Жыл бұрын

thanks very much i have learned the most from you.

@willberger3063 3 жыл бұрын

Great Video! Thanks!

@johnbassett5407 3 жыл бұрын

Thanks Jarrod for sharing.

@vishart81 3 жыл бұрын

Thank you Sir for sharing this wonderful strategy . Could you also share the levels for short sell strategy

@bustad4675 5 жыл бұрын

Great video, simple to understand and presented well!! Look forward to seeing of your material.

@TheTransparentTrader 5 жыл бұрын

Thanks for the comment. I hope you find it helpful!

@gdydbjsiuxvsnsjdx 2 жыл бұрын

Thank you!

@stevemoss6818 6 жыл бұрын

Great stuff! I really look forward to all your videos. I was wondering if you tested it going short if the sp500 was below the 200 MA and the RSI went above 90?

@TheTransparentTrader 6 жыл бұрын

Hi Steve, glad you like the videos. I tested this shorting idea many years ago when I used to test manually (without the use of software). The results are not as promising as going long. Stock market indexes like the SP 500 behave quite differently when in short term pullbacks in longer term up trends compared with short term rallies in downtrends. So it's difficult to trade "mirror" signals for long and short like which can be applied to markets such as FX.

@killjerkz 5 жыл бұрын

Very simple and smart strategy. Beginners dont waste your time looking to far from this.

@r.scandiuzzi1895 2 жыл бұрын

Tks to sharing ! I used this strategy too but my target is The highest price of The last 2 candle and use a stop with a 1.2 X True range of 14 periods.

@dionisis_20n 3 жыл бұрын

if this strategy only yields 10% in 10 years, what makes it a good strategy? Wouldn't holding an ETF that follows s&p500 be more profitable than deploying this strategy? I do not want to come off as rude by any means. I have been developing strategies and I am scraping those that cannot outperform s&p500. So I am curious why would you consider such a strategy? Would you combine it with another one so you can distribute risk?

@FreemeTarot 4 жыл бұрын

Excellent information. I appreciate the video. 1 question. How to use RSI in bear market to make profits from Mean reversion.

@rvandi1 5 жыл бұрын

Great stuff! Just not sure when the system says to close the trade started on april 10th 2018..

@ghosejoy 5 жыл бұрын

Question: 1) When in an uptrend, the stock might give you a better return by holding it on a long term than shuffling it around an RSI. 2) When in secular downtrend, above MA200 but still a sell off, RSI triggers will lose money. How will this strategy be termed superior when it makes less money in bull phase and loses money on other phases. To validate the response, please confirm how much would have been the gain if the stock was held for long term compared to mechanical trading.

@jM-cj8qx 2 жыл бұрын

Great points. But in the FOREX market. You get 500:1 leverage on your accounts and they have funding programs. Buy and hold wouldn't make sense on these accounts. Plus its there capital making 5% a year on 500K is alot different then your personal account of say 30K.

@boccobadz 2 жыл бұрын

That's the thing - this long-only strategy looks good during backtesting but we were in the biggest (printed) bull of all time, almost any buy would work.

@TH-X1000 3 жыл бұрын

How much would you have made had you bought at the very beginning and sold at the very end of the period you are looking at? Anything below is not a good strategy... but and hold vs short trades...

@kiransatya2437 3 жыл бұрын

That's really awesome... I have questions on a strategy that I am building and need your suggestions on it..please provide your contact info.

@davidhaylett1810 2 жыл бұрын

Hi just a variation on a previous question. Do you think trading stocks with this is ok if the stock is above its own 200 period moving average but the S&P500 Index is below its 200 period average ? It’s a question of whether we need the general tide to be rising to float all of the individual boats so to speak ? I’ve asked this question to Jake Bernstein ref one of his strategies and he said he paid no attention to the index. But when the S&P500 is below its 200 MA, it does seem to be difficult to get much upward movement for any stocks.

@emz2kind81 6 жыл бұрын

Excellent video thank you very much. Is it the 10 EMA AND 200EMA or SMA?

@TheTransparentTrader 6 жыл бұрын

Glad you liked it. It's not vital whether it's an EMA or SMA. In my testing I have used both SMA's.

@Berghiker 4 жыл бұрын

What percentages are we looking at per week?

@omairtech6711 2 жыл бұрын

What other instruments can this strategy be used on?

@virtualvessel0 Жыл бұрын

Did you try this on intraday timeframes, also Short and Long?

@YaSoFine Жыл бұрын

Could you not use this same for bear market by just inversing the entry and exit points. That is when RSI is above 70 or 80 (which ever is top) go short and cover when price goes below Moving agerage?

@zaingazi3548 2 жыл бұрын

Can you do a video of mean reversion strategy with vwap trading forex pairs.

@PanchiTrades 3 жыл бұрын

The strategy looks good, but can you please advise what would be an ideal stop loss once we enter a trade.

@TheTransparentTrader 3 жыл бұрын

I have done testing and found that a fixed 80 point stop loss works pretty well.

@argosydavid2986 5 жыл бұрын

Thank you Jarrod! Excellent video! nice content and nice and clear short lecture. After i heard the video I back tested it with BAC, WBA and WTW, the success rate was around 85%! I have some questions though, I hope you do not mind to clarify them for me: 1) Use of 10 MA: Do we use the 10 MA for entry as well or it is only used for to exit the trade only? 2) Entry: The RSI,sometimes, stays below 10 for several days. So, when do you enter the trade, on the first day? or wait some time ? What time of the day do you think is best to enter the trade? 3) Exiting: when do you exit once the day closed above the 10 MA, on the fist day? you wait another day? I observed that many times, the rally continued for more days after the first close above the 10 MA. 4)Late reversion: what do you do if the stock did not close above the 10 MA for more than five days? what is your maximum wait? and what action do you take if it many days? It is a lot of questions , I hope you do not mind to clarify them for me! Thanks David

@TheTransparentTrader 5 жыл бұрын

Hi David. The 10MA is only used for Exit. You should enter on the first day the RSI closes

@argosydavid2986 5 жыл бұрын

@@TheTransparentTrader Hi Jarrod, Thank you so much. Yes you have answered all my questions! Thanks. Thanks!

@puneetarora9114 3 жыл бұрын

Thank you Can we also use 3 period RSI? Also, what is the stop loss in this strategy? And what is the Risk reward ratio as you have tested this strategy?

@TheTransparentTrader 3 жыл бұрын

There will be times where the 3 period would work better than 2 and times where it's worse. Overall 2 works better. I got the idea from Larry Connors and while he doesn't recommend a stop loss, I have found 80 points works quite well.

@jsh111 3 жыл бұрын

80 points on SPX? That's like $4000 for emini...

@zipodipo7923 2 жыл бұрын

Can you adapt this strategy to scalp forex pairs ?

@guyredares 6 жыл бұрын

Nice, thank you for sharing this strategy; what would have happened if the system took a trade and the price never crossed the 10 MA but went down instead? this system has no stop loss..

@TheTransparentTrader 6 жыл бұрын

Hi Guy. In theory and in testing, there is always going to be a small rally where the price crossing the 10 MA and gives and exit signal. But I would definitely use a stop loss with this strategy. In Larry Connors original work he doesn't demonstrate a stop loss but does note that after a lot of testing he concluded that using one actually hurts the performance of this particular strategy in the long run. I encourage anyone looking to trade this strategy to test their own stop losses or have a way to hedge using another instrument. Personally, I would give up some long term profits in favour of having a stop loss.

@guyredares 6 жыл бұрын

I am always amazed by the simplicity of the strategies the last vs. the level of knowledge & sophistication of the quant traders

@jmoz 4 жыл бұрын

REKT.

@arfa9601 4 жыл бұрын

With that massive uptrend almost any strategy to buy wins!

@TheTransparentTrader 4 жыл бұрын

The point is, you don't know it's going to be a massive uptrend. So you need a strategy to get you in and out. The s&p 500 was in a massive uptrend until the end of Feb this year (2020) until it wasn't!

@simonribas4625 3 жыл бұрын

how does this strategy compare, regarding profitability, to just holding the s&p?

@perthdancefloors4275 3 жыл бұрын

This was going to be my question also! In those bull markets looks like you could buy and hold.

@daydreamer7432 4 жыл бұрын

I am late, though have you tested it with the commissions ?

@daydreamer7432 4 жыл бұрын

and I emailed you but didn't receive the pdf, could you please check

@jamesgaul3544 2 жыл бұрын

Why don't you set your RSI to 90 and 10? So during a bear market like 2008, then if it's under the 200 ma. and RSI goes above 90 buy a put and sell it as price goes below the 10 ma.

@Berghiker 4 жыл бұрын

Have you considered making an algo for this?

@kreed1004 4 жыл бұрын

-82%

@Berghiker 4 жыл бұрын

@@kreed1004 What does that mean?

@davidhaylett1810 2 жыл бұрын

Hi, Can this be used for individual US stocks in the S&P 500 rather than just the index ?

@TheTransparentTrader 2 жыл бұрын

Possibly. I suggest testing a few out! I only use it on the index.

@davidhaylett1810 2 жыл бұрын

@@TheTransparentTrader I have not tested this thoroughly but because stocks have greater volatility, I think this works a lot better with an RSI less than 5. Using less than 10 often just isn’t enough of a pullback and the stock continues to fall. The other thing I’ve noticed is to make sure the setup bar has fallen well below the 10 period MA, at least so that the bar is not touching the MA at all.

@carlo9524 3 жыл бұрын

Can you use this with the SPY?

@TheTransparentTrader 3 жыл бұрын

The test wasn't done on the spy. I suggest you have a look and test / compare with the spy. I expect results will be similar.

@michaelbloch4225 3 жыл бұрын

Does this work on FX ? Thx

@TheTransparentTrader 3 жыл бұрын

Not all FX. Some FX markets respond well. But this works best on S&P

@amlensingha6349 4 жыл бұрын

85 woww. would try it . can't we do selling if RSI goes above 90

@TheTransparentTrader 4 жыл бұрын

The stock market index doesn't behave the same when being overbought. It's easier to find short term bottoms / buying points than the opposite.

@brightdesk3804 3 жыл бұрын

Where will be stop loss

@davek7511 4 жыл бұрын

Do you set a stop loss when you enter the trade?

@TheTransparentTrader 4 жыл бұрын

Connors doesn't actually suggest a stop loss as a way to control risk with this strategy. Personally, I always use stop losses as part of my risk control. I would suggest a stop loss calculated by a multiple of the ATR for the S&P.

@TheTransparentTrader 4 жыл бұрын

@davek7511 4 жыл бұрын

@@TheTransparentTrader Thanks. What multiple? 1, 1.5, 2? Did you ever backtest with an ATR stop? How does it impact expectancy?

@TheTransparentTrader 4 жыл бұрын

@@davek7511 With this type of mean reversion strategy, you're actually buying into weakness. So there's no "best" area to put the stop. I would encourage you to test looking at past trades yourself. This is why Connors talks about how "Stops Hurt" performance. Which I agree with for this type of strategy. You're then also faced with the dilemma of when you have been stopped out, how and when do you re enter? Because the entry conditions are usually still in place. Again, something I would encourage testing with.

@davek7511 4 жыл бұрын

@@TheTransparentTrader I will take a look...

@TeemoLoverHD 3 жыл бұрын

where do you put your stop loss?

@TheTransparentTrader 3 жыл бұрын

I've found 80 points works pretty well.

@TeemoLoverHD 3 жыл бұрын

thank you sir

@Berghiker 4 жыл бұрын

What about trading stocks from $20 to 60. You might do much better.

@lnostdal 4 жыл бұрын

I think these tend to trend more than forex and large caps

@adokoka 4 жыл бұрын

This is not a mean reversion strategy. You are not trading towards the mean. You are rather trading away from the mean. You could call this strategy mean repulsion strategy.

@sommi888 4 жыл бұрын

🧡💛💚💙 This is a "buy the dip" strategy which is going through the longest bull run in American history. Becareful doing this in the next 10 years 🧡💛💚💙

@TheTransparentTrader 4 жыл бұрын

You are right, it is a buy the dip strategy. But notice there is a filter to prevent you from trying to buy when the market is going through down periods.

@sommi888 4 жыл бұрын

@@TheTransparentTrader 🧡💛💚💙 Dont worry bro I already know this works because I use the 200 EMA on Bitcoin when I day-trade and it works like a charm. Being bullish above it, and bearish under it, really helps keep you on the right side. It is deceptively simple but it definitely has helped me keep more coins every month

@fdsafsgrgsdg242 3 жыл бұрын

@@sommi888 are you still going strong?

@scarfo441 2 жыл бұрын

...a trader can have 30% win percentage and make 10 time the money you make with a 85%.

@valueray 3 жыл бұрын

13 years 85% ? you get more money just holding it !

@harshrajjadhav940 3 жыл бұрын

It is in the market for a very short time, you can employ other strategies with it.

@goldenbrettfx90 5 жыл бұрын

Dude, the best mean reversion indicator is VWAP, then the second best one is THV Coral. 100%, I always know what I'm talking about. You can use your little RSI in confluence as a secondary indicator, but that's about it.

@finanzferdinand9874 Жыл бұрын

Handful of trades at that win level per year. Not very attractive.

@shner6742 4 жыл бұрын

am i missing something, or is this strategy really bad, because profiting 2% a year is nothing, u can easily make 10% a year with sp 500,

@hb7of9 3 жыл бұрын

Yeah man 2% is just crazy low

@shner6742 3 жыл бұрын

@@hb7of9 the stupidest strategy i have ever heared, u can esily make 10 to 30% with ETFs a year, like wtf 🤔

@hermanspiteri9929 3 жыл бұрын

@@shner6742 With such a winning rate% you can experiment with position sizing. Then it isn't 2% yearly.

@cayyacare1903 2 жыл бұрын

@@shner6742 xdddd the strategy is very little time on market so is easily compatible with others strategies

@vasudevgupta9277 4 жыл бұрын

This is Bullshit! Its just an overfitted strategy between the time he's testing it on. That's why he gets so good results.

@Henry-zw2ys Жыл бұрын

My back-testing shows it's best for me on 3m TF (~58.8% WR), but ONLY for a tiny number of assets (3), only problem is my limited historical data to back-test on, so I don't know how this will perform long term, which only forward testing will show.