Reversal Trading Strategy

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The Reversal Trading Strategy produces the highest profit/loss ratio trades out of all my strategies. I use a 20 cent stop and often see 50 cents to over 1.00 profit per share. The reason these trades have such a great profit/loss ratio is because when I buy off the bottom or short off the top I have a very tight stop. When we get a tight stop it’s easier to achieve high profit/loss ratios.

Criteria for a reversal stock candidate
1) I look for stocks hitting new highs or new lows
2) I look for at least 5-10 consecutive 5min candles of the same color
3) I look for RSI below 10 or above 90 to indicate extreme conditions
4) I think of these stocks as a rubber band, the more stretched out it is, the better the snap back potential
5) I look to buy the first candle that begins to reverse with a stop either at the high/low or minus 20 cents.
6) I use trailing stops to keep myself in these winning trades as long as possible.