SVXY Mean Reversion

1. Setup Definition and Market Context

This strategy involves trading SVXY to capitalize on the mean-reverting nature of the VIX after extreme spikes.

2. Entry Rules

• Timeframe: 15-minute chart
• Indicator: VIX futures term structure (front month vs. second month)
• Price Action: For long trades (UVXY/VXX), entry on a bullish engulfing candle after a VIX spike. For short trades (SVXY), entry on a bearish dark cloud cover candle after a VIX crush.

3. Exit Rules

• Winning Scenarios: Exit when the VIX returns to its 20-period moving average on the 15-minute chart.
• Losing Scenarios: Exit if the VIX makes a new high (for shorts) or a new low (for longs) after entry.

4. Profit Target Placement

• Method: 2R (twice the risk) based on the stop loss distance.
• Example: If risking 50 cents per share, the profit target would be $1.00 above the entry for longs, or $1.00 below for shorts.

5. Stop Loss Placement

• Method: Structure-based, placing the stop loss below the low of the entry candle for longs, or above the high for shorts.

6. Risk Control

• Max Risk Per Trade: 1% of account equity.
• Daily Loss Limit: 3% of account equity.
• Position Sizing: Calculated based on the stop loss distance and the max risk per trade.

7. Money Management

• Method: Fixed fractional (1% risk per trade).
• Scaling: No scaling in or out.

8. Edge Definition

• Statistical Advantage: Exploiting the mean-reverting nature of volatility.
• Win Rate Expectation: 60-65%
• Risk:Reward Ratio: 1:2

9. Common Mistakes and How to Avoid Them

• Mistake: Overstaying a trade and getting caught in a volatility regime shift.
• Avoidance: Adhering strictly to the exit rules and not hoping for a trade to come back.

10. Real-World Example

• Scenario: VIX is in backwardation. A sudden 15% spike in the spot VIX occurs. A bullish engulfing candle forms on the 15-minute chart of UVXY at $12.50. A long trade is entered.
• Stop Loss: Placed at $12.25 (below the low of the entry candle).
• Profit Target: Placed at $13.00 (2R).
• Outcome: The VIX mean reverts, and UVXY reaches the profit target.

SVXY Mean Reversion

1. Setup Definition and Market Context

This strategy involves trading SVXY to capitalize on the mean-reverting nature of the VIX after extreme spikes.

2. Entry Rules

• Timeframe: 15-minute chart
• Indicator: VIX futures term structure (front month vs. second month)
• Price Action: For long trades (UVXY/VXX), entry on a bullish engulfing candle after a VIX spike. For short trades (SVXY), entry on a bearish dark cloud cover candle after a VIX crush.

3. Exit Rules

• Winning Scenarios: Exit when the VIX returns to its 20-period moving average on the 15-minute chart.
• Losing Scenarios: Exit if the VIX makes a new high (for shorts) or a new low (for longs) after entry.

4. Profit Target Placement

• Method: 2R (twice the risk) based on the stop loss distance.
• Example: If risking 50 cents per share, the profit target would be $1.00 above the entry for longs, or $1.00 below for shorts.

5. Stop Loss Placement

• Method: Structure-based, placing the stop loss below the low of the entry candle for longs, or above the high for shorts.

6. Risk Control

• Max Risk Per Trade: 1% of account equity.
• Daily Loss Limit: 3% of account equity.
• Position Sizing: Calculated based on the stop loss distance and the max risk per trade.

7. Money Management

• Method: Fixed fractional (1% risk per trade).
• Scaling: No scaling in or out.

8. Edge Definition

• Statistical Advantage: Exploiting the mean-reverting nature of volatility.
• Win Rate Expectation: 60-65%
• Risk:Reward Ratio: 1:2

9. Common Mistakes and How to Avoid Them

• Mistake: Overstaying a trade and getting caught in a volatility regime shift.
• Avoidance: Adhering strictly to the exit rules and not hoping for a trade to come back.

10. Real-World Example

• Scenario: VIX is in backwardation. A sudden 15% spike in the spot VIX occurs. A bullish engulfing candle forms on the 15-minute chart of UVXY at $12.50. A long trade is entered.
• Stop Loss: Placed at $12.25 (below the low of the entry candle).
• Profit Target: Placed at $13.00 (2R).
• Outcome: The VIX mean reverts, and UVXY reaches the profit target.

SVXY Mean Reversion

1. Setup Definition and Market Context

This strategy involves trading SVXY to capitalize on the mean-reverting nature of the VIX after extreme spikes.

2. Entry Rules

• Timeframe: 15-minute chart
• Indicator: VIX futures term structure (front month vs. second month)
• Price Action: For long trades (UVXY/VXX), entry on a bullish engulfing candle after a VIX spike. For short trades (SVXY), entry on a bearish dark cloud cover candle after a VIX crush.

3. Exit Rules

• Winning Scenarios: Exit when the VIX returns to its 20-period moving average on the 15-minute chart.
• Losing Scenarios: Exit if the VIX makes a new high (for shorts) or a new low (for longs) after entry.

4. Profit Target Placement

• Method: 2R (twice the risk) based on the stop loss distance.
• Example: If risking 50 cents per share, the profit target would be $1.00 above the entry for longs, or $1.00 below for shorts.

5. Stop Loss Placement

• Method: Structure-based, placing the stop loss below the low of the entry candle for longs, or above the high for shorts.

6. Risk Control

• Max Risk Per Trade: 1% of account equity.
• Daily Loss Limit: 3% of account equity.
• Position Sizing: Calculated based on the stop loss distance and the max risk per trade.

7. Money Management

• Method: Fixed fractional (1% risk per trade).
• Scaling: No scaling in or out.

8. Edge Definition

• Statistical Advantage: Exploiting the mean-reverting nature of volatility.
• Win Rate Expectation: 60-65%
• Risk:Reward Ratio: 1:2

9. Common Mistakes and How to Avoid Them

• Mistake: Overstaying a trade and getting caught in a volatility regime shift.
• Avoidance: Adhering strictly to the exit rules and not hoping for a trade to come back.

10. Real-World Example

• Scenario: VIX is in backwardation. A sudden 15% spike in the spot VIX occurs. A bullish engulfing candle forms on the 15-minute chart of UVXY at $12.50. A long trade is entered.
• Stop Loss: Placed at $12.25 (below the low of the entry candle).
• Profit Target: Placed at $13.00 (2R).
• Outcome: The VIX mean reverts, and UVXY reaches the profit target.

SVXY Mean Reversion

1. Setup Definition and Market Context

This strategy involves trading SVXY to capitalize on the mean-reverting nature of the VIX after extreme spikes.

2. Entry Rules

• Timeframe: 15-minute chart
• Indicator: VIX futures term structure (front month vs. second month)
• Price Action: For long trades (UVXY/VXX), entry on a bullish engulfing candle after a VIX spike. For short trades (SVXY), entry on a bearish dark cloud cover candle after a VIX crush.

3. Exit Rules

• Winning Scenarios: Exit when the VIX returns to its 20-period moving average on the 15-minute chart.
• Losing Scenarios: Exit if the VIX makes a new high (for shorts) or a new low (for longs) after entry.

4. Profit Target Placement

• Method: 2R (twice the risk) based on the stop loss distance.
• Example: If risking 50 cents per share, the profit target would be $1.00 above the entry for longs, or $1.00 below for shorts.

5. Stop Loss Placement

• Method: Structure-based, placing the stop loss below the low of the entry candle for longs, or above the high for shorts.

6. Risk Control

• Max Risk Per Trade: 1% of account equity.
• Daily Loss Limit: 3% of account equity.
• Position Sizing: Calculated based on the stop loss distance and the max risk per trade.

7. Money Management

• Method: Fixed fractional (1% risk per trade).
• Scaling: No scaling in or out.

8. Edge Definition

• Statistical Advantage: Exploiting the mean-reverting nature of volatility.
• Win Rate Expectation: 60-65%
• Risk:Reward Ratio: 1:2

9. Common Mistakes and How to Avoid Them

• Mistake: Overstaying a trade and getting caught in a volatility regime shift.
• Avoidance: Adhering strictly to the exit rules and not hoping for a trade to come back.

10. Real-World Example

• Scenario: VIX is in backwardation. A sudden 15% spike in the spot VIX occurs. A bullish engulfing candle forms on the 15-minute chart of UVXY at $12.50. A long trade is entered.
• Stop Loss: Placed at $12.25 (below the low of the entry candle).
• Profit Target: Placed at $13.00 (2R).
• Outcome: The VIX mean reverts, and UVXY reaches the profit target.

SVXY Mean Reversion

1. Setup Definition and Market Context

This strategy involves trading SVXY to capitalize on the mean-reverting nature of the VIX after extreme spikes.

2. Entry Rules

• Timeframe: 15-minute chart
• Indicator: VIX futures term structure (front month vs. second month)
• Price Action: For long trades (UVXY/VXX), entry on a bullish engulfing candle after a VIX spike. For short trades (SVXY), entry on a bearish dark cloud cover candle after a VIX crush.

3. Exit Rules

• Winning Scenarios: Exit when the VIX returns to its 20-period moving average on the 15-minute chart.
• Losing Scenarios: Exit if the VIX makes a new high (for shorts) or a new low (for longs) after entry.

4. Profit Target Placement

• Method: 2R (twice the risk) based on the stop loss distance.
• Example: If risking 50 cents per share, the profit target would be $1.00 above the entry for longs, or $1.00 below for shorts.

5. Stop Loss Placement

• Method: Structure-based, placing the stop loss below the low of the entry candle for longs, or above the high for shorts.

6. Risk Control

• Max Risk Per Trade: 1% of account equity.
• Daily Loss Limit: 3% of account equity.
• Position Sizing: Calculated based on the stop loss distance and the max risk per trade.

7. Money Management

• Method: Fixed fractional (1% risk per trade).
• Scaling: No scaling in or out.

8. Edge Definition

• Statistical Advantage: Exploiting the mean-reverting nature of volatility.
• Win Rate Expectation: 60-65%
• Risk:Reward Ratio: 1:2

9. Common Mistakes and How to Avoid Them

• Mistake: Overstaying a trade and getting caught in a volatility regime shift.
• Avoidance: Adhering strictly to the exit rules and not hoping for a trade to come back.

10. Real-World Example

• Scenario: VIX is in backwardation. A sudden 15% spike in the spot VIX occurs. A bullish engulfing candle forms on the 15-minute chart of UVXY at $12.50. A long trade is entered.
• Stop Loss: Placed at $12.25 (below the low of the entry candle).
• Profit Target: Placed at $13.00 (2R).
• Outcome: The VIX mean reverts, and UVXY reaches the profit target.