Trend Following vs Mean Reversion: Two Core Strategies
TL;DR: Trend following suits trending markets (let profits run). Mean reversion suits ranging markets (fade extremes). Beginners: master trend following first, verify with backtests.
Trend Following
Simple implementation: MA5 crosses above MA20 = long; below = exit. Pros: big profits in trends. Cons: whipsaw in ranging markets, low win rate but high risk/reward.
Mean Reversion
Simple implementation: Bollinger Bands (upper = short, lower = long) or RSI extremes. Pros: steady in ranging markets, high win rate. Cons: painful in trends, fee-sensitive.
Key: Always backtest + strict risk control. Historical data is not a profit promise.