Mean reversion scanner settings (and when it works)¶
Mean reversion is one of the fastest ways to donate money if you treat it like:
“It’s down a lot so it must bounce.”
The tradable version is boring: - liquid names - a real extreme - a defined time window - a tight invalidation - and no interference (no “hope holds”)
The trap (why people blow up)¶
The mistake is usually a mix of: - overfitting (too many conditions, no clarity) - trading junk (low-float cheap names) - no hard invalidation
If you want clean behavior, keep a price floor (e.g., nothing under $15) and enforce liquidity.
The three conditions that make mean reversion tradable¶
1) Liquidity¶
If the spread is wide, you’re paying for the bounce.
Start here: - Liquidity filters
2) A real extreme¶
Define “extreme” with something observable: - large % move relative to typical range - large distance from VWAP - range expansion + volume
3) Tight risk (invalidation)¶
If you can’t say exactly where you’re wrong, you’re not trading mean reversion. You’re gambling.
A baseline mean reversion lane (simple, not overfit)¶
Start with: - liquid stocks only - meaningful volume today (dollar volume matters) - exclude low-float cheap chaos - time window: first 90 minutes or last 90 minutes
Trigger ideas: - reclaim of a key level - reclaim of VWAP (with confirmation)
Related workflow support: - VWAP pullback workflow
When mean reversion is a bad idea (skip days)¶
Avoid (or size down hard) when: - broad market is trending hard (bounces fail) - news-driven breakdowns (the “why” matters) - thin floats / wide spreads
If you’re new, don’t start here. Start with candidate selection + momentum lanes: - Stocks in play workflow - Momentum filters
How Trade Ideas helps (practically)¶
Trade Ideas helps you: - find extremes inside your lane - rank and shortlist - alert you when the reclaim trigger happens
Useful pages: - Columns that matter - Alert Window workflow
Who this is NOT for¶
If you’re struggling and have a small account, mean reversion is often the wrong first style. Fix process and risk control first: - Paper trading checklist
