The idea behind mean reversion is to look for stocks that are experiencing rapid declines and trying to time a quick relief bounce.

To ensure we are not buying into failing companies we are looking for stocks still in longer-term uptrends but have pulled back over the last few weeks.

Each weekend as part of StatsEdge Pro there will be an email sent with a list of these stocks long with entry prices to wait for and stop losses. In all cases we are looking for the selling to continue before buying the stock lower.

EXIT RULES:

• Stop loss provided with each trade.

• No profit targets since we want to give the stock room for upside surprises

• We use a time stop for exit of one week from entry. So the backtest assumes an exit on Monday mornings.

  • The exit is where a traders eye can really boost returns. If you have a good entry on a nice name on a pullback it only makes sense to keep some.