130: Building Mean Reversion trading strategies Part 2 with Cesar Alvarez

In this episode of Better System Trader, host Andrew Swanscott continues a series on building Mean Reversion strategies with Cesar Alvarez from Alvarez Quant Trading. They delve into entries, focusing on classifying market conditions (trending vs. non-trending and volatility) and adjusting strategies accordingly, including tightening parameters in bear markets or cutting position sizes. Cesar shares tips for choosing trades with higher probability when there are too many signals, emphasizing ranking based on historical volatility and recent returns. They discuss position sizing, favoring a fixed percentage approach, and the impact of the number of positions on trading results, cautioning against over-concentration and the role of luck. The conversation covers entry methods (market vs. limit orders), the impact of stops on returns, and implementing multiple exits, including indicator-based, maximum loss, and bar exits, while advising against trailing stops and profit targets in mean reversion.