Short-Term Reversal Systems

Reversal systems are among the most effective systems that you can find for trading the stock index futures contracts. One of the most pronounced tendencies of the stock market is for the indices such as the S&P 500 to travel from a relative low to a relative high and from a relative high to a relative low. By this we mean that the market will often swing from the lowest close in x number of days to the highest closing price in x number of days.
The focus of my reversal system is a short-term move that reverses a recent extreme in price. You await the onset of a reversal from a relative high or low before trading in the direction of this counter-swing. The historical results of our system are high enough to warrant the use of such vehicles as OEX put and call options. We do not recommend futures positions leveraged far .beyond your cash. Rather, the safety net provided by slightly out of the money hedging options against futures positions can be crucial to your survival when the unexpected strikes.
In the S&P 500 futures market, many traders employ stochastics, RSI and other trading oscillators. Normally these traders will buy at the close when the oscillators move from oversold to overbought and sell when the reverse occurs. I refer you to my chapter on the "Market Wizard" method for more detail on this type of strategy. The prevalence of oscillator trading strategies can provide an edge in using intraday reversal systems. Indeed, I will show you how oscillator traders will actually push our reversal system trades in the direction we want.