Revert to the Mean

***Originally this was a revert the mean strategy but it has morphed to a strategy that aims at capturing a trend.
The parameters are completely different than this 1st page describes.***

***Now it has morphed back to a revert to the mean strategy. Instead of on the 1 min. on the Day.
After looking a little more closely at the 1 min, there were a lot more false signals than I thought. And it does not work at all for anyother pair than EURUSD and then only when trending. But on the Day candles it works remarkeably well on all the pairs.***

Will be trying to further refine use of Bollinger Bands.
As of now am using 600 bb on the 1 min.
Not so many signals, but when there is a signal it is good.
The 600 sma has a channel of 10 pips either side that acts as a tp.
When prices drop below the upper bb band target is upper channel of the 600 sma
And just the opposite for prices that close above the lower bb band
Positions are added if prices continue up after closing below upper band.
Opening with 1%
2nd position is 2%
3rd position is 3%
Making sure not to add positions if they are too close to each other
Idea is to minimize losses if trade goes against.
It is not a strict rule to take profit at channel. Anything that seems reasonable is fine.

Using a simulated trading ea.
Tendency is complicate things.
This is fairly simple. I need to keep it that way.

Wait for a big run so that the reversal to the mean is probable.

A worst case scenario..
Got in too early before the big move. 1%
2nd entrance 2%
3rd entrance 4%
If it had continued higher next entrance would have to be 8%
that's getting into too much risk.

first entrance may have to .5%
2nd 1%
3rd 2%
if there were to be a 4th it would be 4%
total 7.5% but less than that since positions are added further along the move.
There is no guarantee it will turn enough for net gain.
But.... this the 1 minute. A big move on the 1 minute is also accompanied by high volatility.
Moreso than on higher time frames. That means the probability of a swing back to the mean is very likely.
It doesn't keep its gains very well on the 1 min. Which is what I am counting on in case I get in too early.

Asian session, before Tokyo... not usual for a big move higher or lower at this time.

I love the 1 minute...

Bottom of a channel Asian Session Tokyo
BB 600 bands tight...

Tried three times to revert after London open...
Better to wait. It can sky rocket at London open. But it failed three times for significant move higher.
The short was good for 10 pips. If it had jumped higher I would wait and use the Martingale. .5,1,2,4

Wait for it... NY open... the first cross below the upper bb600 is not a good entry. Usually if there is going to be a decent move... there will be a small pullback first.. Probably picking up stops that are too close... If I had taken all those trades it would be 50 pips so far for the day. But that means being glued to the monitor, no sleep...

Just have to be careful 2 things..
Getting too early. Wait for the big moves. They are there. At least once per day.. usually Just be patient and wait. You can trust the 600 bb on the 1min
And don't use position sizes that will eat up the margin.
If I have to use the martingale it can add up very very fast...
Start out small... .05% can get to 10%or more very, very quickly...
there is no absolute guarantee it will reverse enough to avoid at least some loss.
All it takes is one huge loss and all the hard work is lost.

This is scaring me.
This is just so perfect. It's like taking candy from a baby.
I'm sure there is smack down somewhere. But I'm not seeing it.
I've added the 400sma as a further indicator of take profit.
Not needed. out goes the 400 sma.
600 is deviation metric...
there's that tendency to clutter the chart up.

If I'm trading 10 or so pairs and each pair gets a set up, which is entirely likely... Say I average 30 pips per pair..
300 pips in a day?
I printing sign for the wall. Right in front of me.
WAIT FOR IT

This is at London open. The pullback had already taken place, the stops were taken out this second pullback was actual sellers. So I entered short for +10

The reason I like this strategy so much is...
If it goes my way... I win
If it goes against me... I win...
Why bother with any other set up?

Okay here's what can happen... getting in too early... and it could get worse..
I need to really meditate on that sign on the wall
"Wait for it!"
The move has to have legs and run outside the bb band for a while. It can't just pop up and then down... It won't work.'
Remember it will tend toward the mean after it has deviated for a while...
Just a spike or pop up won't work. It has to run..

Went back 2 weeks in the simulator on GBPUSD.
averaging 36 pips/day. If I am monitoring several other pairs this could be significant.
Only 1 loss because I entered too early.
During Asian markets it is possible to trade a channel using upper and lower bb600 bands.
I don't have a backup plan if the trade should break out though. So it would have to be in the slow markets, before Tokyo opens.
And maybe Tokyo if there is no news or data. The markets are small and so there is not much activity. Slow. Breakouts are very rare during that time.
Not sure it's worth it though. The risk.
Trading the reversal of a break out is much more predictable.
And I have a plan if it should continue higher and not reverse at that point.

Practicing practicing practicing in the simulator...
Wanna be ready for when the markets open.
Patience is really needed.
Waiting for the entry and then waiting for it play out.
Have to have the entry plan and the exit plan.
Have a bunch of trades in my account... from the previous strategy which I have dumped.
They're questionable now compared to this one. Which is far superior.
I could just close everything and start over. But it would mean losses.
If I leave them open it could mean even bigger losses later.
This is the position a trader never wants to be in.
Most likely I'll leave them alone and try to trade them according to the old strategy until they are gone.
This won't happen now.
Sitting in a trade feeling helpless, hoping it goes my way. Not where I want to be. Ever again!!

Patience is needed This took 5 minutes on the simulator.
If it was live it would have taken 7 hours.
Stress .. Discipline..
There were two more crosses below the upper band right after the entry.
But they were fairly close and the target...the 600sma was still a good ways away.
So there was no need to take them.
Since it is a martingale I wanted to wait to see if it would go significantly higher before entering again.
Also time of day. the US market hadn't opened yet.. It had time to run.

US market closed, Sydney market.
Thinly traded.. not much volume so the move down most likely wouldn't go anywhere...
Again this is the simulator. It too 2 minutes on the simulator..
It would have been an hour in live trading.
It's the patience I need to work on.
The strategy is very good. I can see that.
Now the trader's patience needs to develop.
Discipline, Discipline, Discipline.. As a mentor once admonished.

Okay.. Just saw something...
That first entry more times then not is a loser if I hold it waiting for reversal all the way to mean.
But if it is going to be big run it will reverse a little bit, taking out stops most likely.
I can enter .05% it but take profit after a few pips, 5 or so... if it drops back further then that means there is no break out and it will be trading sideways for a while. I've got 5 pips... In rare cases it could be more than a reversal to the mean, it could be a dramatic full change of direction.
If it does sky rocket wait and enter for the reverse to the mean with 2%. Trade it as if I still was holding the 1% which would be a loss at that point... But I'm not holding the position I already closed it for a small gain.
It also depends on time of day and news and data.
Way to go... Thank you.

Here is exactly what I was thinking about.
There is a signal but it is the first cross inside of the 600bb.. It could be abig loser if there is strong move..
It does retrace 5 pips. I close. It take 45 mins...
But instead of a strong move it reverses completely.
No way for me to be sure what it will do.
Take the 5 pips and wait for signal in the other direction.
Don't take the first dip, a trend hasn't been identified yet.
Even after a big run the first signal was loser. Small loser.. at .05%
the gain comes from the second entry at 1%
Not willing to wait for more downside.
Take the 20 pips. It takes 2 hours...
+25 pips so far for the day.

Trading to the mean means a moving target.
The mean is the 600sm and it is moving along with the price action.
So really this strategy is more like trading towards the mean.
Can see from this that yes... prices always meet the mean..
But the that can happen if the prices just stall out, then the mean comes up to meet the prices.
There goes a profitable target..
when there is respectable gain as it heads towards the mean. Take it.
I mean really this is the 1 minute. 20 pips on the 1 minute is pretty darn good.