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On this episode of BST Live, Stefan Friedrichowski from JFD Bank joined us to discuss “How to build Mean Reversion trading strategies”.
Here are just some of the tips and insights you’ll discover:
● The "alarm signal" that got Stefan interested in Mean Reversion trading,
● How to determine if a market is good for Mean Reversion or not,
● How to reduce noise and increase the information content in trading charts,
● The danger of using a Mean which moves too fast,
● How the distribution of 2 bar combinations gives clues about potential trading edges,
● Adjusting the Mean length based on the timeframe of the chart,
● Stop loss vs take profit size, trading without a stop loss, degrees of freedom, statistical significance, sample size, entries, exits, and loads more.
► You can discover more from Stefan at jfdgroup.com and check out • Mean Reversion Trading... too.
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** Timestamps **
00:00 Warming up with some tunes
02:45 Trading background
05:14 The "alarm signal" that got Stefan interested in Mean Reversion trading
08:03 How to determine if a market is good for Mean Reversion or not
10:30 The "bricks" that can show Mean Reversion is a good trading idea
15:01 Why analyzing the market using price-based bars is better than time-based bars
19:14 How to reduce noise and increase the information content in trading charts
20:00 Selecting the size of price-based bars
22:35 How the distribution of 2 bar combinations gives hints about potential trading edges
31:39 The 3 currencies that could be the best candidates for Mean Reversion trading
32:39 2 bar combinations for the majors and the implication for trend trades
34:50 2 bar combinations over larger brick sizes
37:29 What is Mean Reversion trading
38:10 How to measure the mean and which indicator Stefan prefers
41:00 Other ways to define the "fair price" of a market
43:35 How to measure when the market has moved "too far" from the mean
46:34 Degrees of freedom in Mean Reversion example
47:25 Using volatility (ATR) to measure distance from the mean
50:34 How to optimize trading parameters
52:22 How often to reoptimize trading strategies and why
54:05 Stop loss and profit target placement
1:00:30 The danger of using a Mean which moves too fast
1:03:03 Adjusting the Mean length based on the timeframe of the chart
1:05:15 Stop loss size compared to take profit size
1:07:45 Should a trading strategy work on all pairs?
1:13:00 Filtering for absence of trend before taking a trade
1:16:30 Trading without a stop loss
1:20:15 Statistical significance, sample size and portfolios
1:25:35 How to discover more from Stefan
🎓🎓🎓 MORE TRADING EDUCATION & CONTENT 🎓🎓🎓
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► Trading Market Internals: tradingmarketinternals.com
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Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.