Comparing Short-Term Trend and Mean-Reversion Trade Outcomes

Summary

This indicator compares four simple trading styles using recent price bars: long and short trend trades, and long and short mean-reversion trades. It simulates entering at a bar close selected by its color and exiting one bar later. A configurable quantity of recent qualifying trades is used to calculate and plot a separate equity-style line for each approach. The author describes rising lines as improving results within the lookback and values above zero as profitable over that window; an option highlights lines that are rising.

The indicator is presented primarily as a filter for daily and weekly charts, and the note warns that plotting can be slow. It suggests limiting the number of bars processed to improve loading time. No systematic performance study, transaction costs, slippage, or robustness analysis is supplied, so the plotted histories are a limited diagnostic rather than evidence of future profitability. The rules use bar color and a one-bar holding period, which may not represent a realistic trading system.

Key ideas

• The indicator compares long and short trend-following with long and short mean-reversion trades.
• Each simulated trade enters at a bar close and exits one bar later.
• The number of recent qualifying trades used in the calculations can be configured.
• Rising lines indicate improving results over the selected lookback, while above-zero lines indicate historical profitability in that window.
• The author positions the indicator as a daily or weekly filter, but provides no cost, slippage, or robustness analysis.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.