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Webinar: Private Banker's Perspective on Risk Management Presentation
I was re-watching your video recently. It is still a great piece of educational material. But I was curious about mean reversion strategies using the value area high/low and VWAP bands. I know you use the satellite core theory for risk management but most of the examples are trend following. So any retracements to those areas may provide a place to add.
Is there a way to implement Satellite Core for mean reversion type trades? How / what areas would you look to add on and take off positions? Thanks.
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
Thanks Given: 1,713
Thanks Received: 3,863
Thanks. If the market is trending that means its in an imbalanced state. Those are the situations where one would want to push as much as possible while cycling through profits. Price is in an imbalanced state (price discovery) and the expectation for the move is unlimited until balance returns. Contrary to that, when price is balanced, we would expect rotational price action. In this scenario, taking a mean reversion trade is a targeted trade. We would have a limited expectation for price which skews the risk-reward profile. So, to answer your question, I do not utilize a core-satellite approach in this type of scenario. I believe its not the right context to do so.