Mean Reversion 0DTE Strategy
How to make money on the return to the blue line.
Last updated
How to make money on the return to the blue line.
Last updated
Mean Reversion refers to the price of a symbol returning to the blue line (opening price) and is one of the most popular 0dte option strategies.
Wall Street employs it day in and day out to crush retail traders.
Understanding how it works and how to use it with the RIGGED AI system will give you the edge you need to win more trades.
For 0DTE options, mean reversion refers to price returning to the blue line (open price) for the session.
This is the most common type of price action, regularly found in low volume nightmare mode sessions (red chart outline) but can occur in full send mode as well.
Wall Street creates fomo by moving SPY or QQQ significantly up or down, it looks and feels like a trend day. Retail traders are late to the move and buy puts at the bottom or calls at the top.
Wall Street then moves the price back to the blue line, liquidating everyone in the process.
QQQ 10/03/24
Look how fast these moves are:
10:06 - BL +4
10:23 - BL +1
11:51 - BL +3
12:54 - Mean Reversion
Each time price reaches the yellow area (BL +3 to +5), it pulls back eventually going to the blue line. That's mean reversion.
Wall Street employs two different mean reversion strategies; algo terrorism and the 3-strike swing.
When price moves ~1-strike from the BL before returning to the BL.
The blue line basically acts as a magnet the entire session with price never moving significantly above or below.
See SPY 10/03/24.
This is pure algo terrorism and should be avoided.
ALGO TERRORISM:
1-strike move in either direction
no on fire alerts
no 100%+ returns
wait until end of session to trade or touch grass
This is probably the best trade setup at RIGGED AI and the main reason why traders love to used RIGGED AI to copytrade Wall Street.
How it works:
The 3-strike rule tells us that the average maximum move we see on SPY or QQQ is BL +/- 3. This is where reversals happen.
At BL +/-3, Wall Street can swing the price and return us to the blue line (mean reversion).
It's an insanely profitable trade setup.
If you trade BULLS BL -3 and held until the end of session, you returned 100%+.
Similar setup, 3-strikes downa nd price bounces almost returing to the blue at the end of the session.
The stock market is designed to go up. 3-strike swings from above the blue happen less frequently, but when they do the returns are ridiculous.
Price stalls 3-strikes above, bear bomb hits KTR and returns a 646% max gain with price nuking back to the blue line.
3-Strike Swing:
The best mean reversion trade setup
Prefer BULL BOMBS BL -2 to -3 with EDGE
BEARS BL +3 will pay out massively if they win (they win less)
Summary:
Mean reversion is the most common type of price action.
In calls, exit to runners BL +3.
In puts, exit to runners BL -3.
The 3-strike swing is the best mean reversion trade setup.
Avoid algo-terrorism mean reversion sessions where price goes BL +/- 1.
Follow the Mean Reversion playlist to learn more.
