Trade With The Trend: Using AggM as a Filter for Short-term Mean Reversion Indicators
In this example, we only permitted trades in the direction of the trend as defined by AggM (DVAM)which is a composite trend/mean-reversion indicator available at www.dvindicators.com. Long trades were triggered when AggM rose above 65 and ended when AggM closed below 35. During this time period, we traded DVO from the long side only, going long<50, exiting above 50. Short trades began when AggM fell below 35, and were closed above 65. During this time period we traded DVO from the short side only, going short>50 and exiting below 50. Excluding 1998, this strategy produced strong returns and very low drawdowns on average. This method works well with other indicators including RSI2 as well.