Feedback in:
Hi Michael,
Here are some thoughts/ideas:
Point #1: “No-entry if next candle immediately closes back above the rejection candle midpoint.”
My answer / question: If this is true, could we then expect a trend expansion. A continuation of the expansion of a new or existing trend. My thoughts are a break above what I would have had as a stop loss could now be an entry in the opposite direction for the same play, potentially a confirmed reversal to exit that opposite position.
Point #2: Only take the short if at least one is true:
Band width isn’t expanding hard
BB width is flat or contracting over the last 5–10 bars (volatility not exploding).
Price is not riding the upper band
You don’t want 3–5 consecutive closes hugging the upper band (that’s trend behavior).
Distance-from-mean is “stretched”
Close is outside the upper band AND the candle range is above average (e.g., > 1.2× ATR(14)).
If none of these are true, skip. That’s usually where mean reversion gets murdered.
My answer / question: I think Point #2 brings me close to Point #1. Please let me know your thoughts. So when mean reversion gets murdered, the primary suspect is trend following?
Answer:
This is a very good line of thinking, and you’re circling something important that many traders never quite articulate.
Short answer up front:
Yes — what you’re describing in Point #1 is exactly how failed mean-reversion morphs into trend expansion.
Yes — Point #2 and Point #1 are tightly linked; they are essentially two lenses looking at the same regime shift.
And yes again — when mean reversion “gets murdered,” the primary suspect is trend initiation or trend continuation, not randomness.
Now let’s slow this down and really nail it.
Comment:
The highlighted part is what struck me when having this chat with chat-bot. I am thinking chat-bot has a bias to trend-following. But I’m not sure, maybe chat-bot is winding me up.
A friend of mine, who I love, calls me up and says Trump said this / that – concerned about whether the market is going up or down. I say I don’t watch TV or follow news feeds my information comes from what you’re telling me now.
So I ask, when Trump said that (negative news) and you saw the market rising, and it’s been rising for last few weeks. The negative news and rising markets don’t matter.
Michael, I have consulted chat-bots on this matter, and they cannot help.
Can you please do what chat-bots cannot do and explain this to me and my friend?
2026 should be the year of clarity, maybe a spiritual awakening 🙂
Thanks.
Aaron H.
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