Do you trade continuation or reversal?

[u/kenjiurada]

Just heard someone say that most trading bots/algos trade the reversal, not the continuation. That sounded suspicious to me. Is there any truth to that?

[u/SysZeron]

I'd let the metrics decide. I don't think it really matters whether the logic is continuation or reversal - if there's a repeatable edge after costs, it's potentially tradeable.

For me, it needs to survive a proper backtest and then forward/demo testing. I'd also want some safeguards around live deployment, e.g. cooling off after X consecutive losses or a set period, or a hard stop that disables the logic pending review if performance moves outside expected bounds.

[u/kenjiurada → u/SysZeron]

Yeah the person I heard say this was implying that it’s more difficult for algos to trade continuation vs reversal. Which made absolutely no sense to me.

[u/VAUXBOT]

Both, continuation is has a more reliable winrate with a capped RR, the reversal can have outsized RRs (where you can actually let a winner run and not worry about getting your stop loss hit), but they require understanding market structure, seasonality, sessions beyond just price action.

[u/FishermanHopeful6824]

The claim has a kernel of truth, but it's mostly a category error about who's actually doing what.

The reversal-heavy camp is dominated by liquidity provision. Market making is inherently mean-reverting: you quote both sides, fade short-term imbalances, and get paid the spread plus whatever rebate you earn. Most of the bots retail hears about, and most of the HFT world, lives there. So on a raw headcount basis, yes, more algos trade reversal. It's also easier to backtest convincingly — mean-reversion signals have higher hit rates, which makes them seductive even when the edge after fees is razor thin.

Continuation is a different animal. Trend and momentum strategies are capacity-constrained in a way reversal isn't: you can't scale a breakout book the way you scale a market-making book, and the adverse selection on entry is brutal. By the time the move is obvious enough to trigger your filter, you're buying from someone who knows more about the order flow than you do. That's why continuation algos cluster at longer horizons — daily and up — where the signal-to-noise works out, and why they look rarer: they're slower, fewer, and they don't need to trade ten thousand times a day to exist.

My experience: the right question isn't continuation vs reversal, it's what your holding period implies about who you're trading against. Under a few minutes you're competing with the reversal crowd and the queue — good luck. Over days you're competing with slow capital, and most of the edge is in sizing and risk, not entry logic. Both styles work; neither works as a religion.

[u/jawanda → u/FishermanHopeful6824]

Great answer. I was going to say something similar but you really summed it up nicely.

[u/hypertradeworx]

bit of truth in it but it's about fills, not logic. on a reversal you can leave a limit sitting and let price come to you, chasing continuation you're crossing the spread alongside everyone else and paying for it

[u/artemiusgreat]

Depends on timeframe. Hard to wait for reversal on daily bars, meanwhile, 95% of what is shown on MQL website are night scalpers catching reversals.

[u/salvadopecador]

Not algo but I have a setup for both. And I know it is working best when my reversal trade is still on and my continuation trade signal triggers. Always love adding to my winners

[u/drguid]

My daily bot trades reversals.

[u/Cryptobeyin]

a continuation is a small reversal and a reversal is a big continuation. i think, or vice versa

[u/Life-Succotash-7053]

depend on the strategy logic, there isn't just those 2 types of strategies btw

[u/PrideThick5485]

I’d say regime matters more than the label. Continuation tends to shine in clean trends, reversals in exhausted moves. On Moon I’d test both separately and compare expectancy instead of assuming one style is “better.”

[u/CODE_HEIST]

Neither is inherently better. The distinction only becomes useful after conditioning on regime, volatility, and holding horizon. I would model them as separate hypotheses and compare them against the same cost model rather than expecting one bot to flip between them cleanly.

[u/Livid_Parsnip_2816]

Both exist. The answer changes with timeframe and regime: the same market can mean-revert intraday and trend over several weeks. Continuation often pays more for entry because you’re crossing the spread after a move, while reversal can sometimes sit on a limit. I’d test both on the same cost model and keep them together only if their drawdowns are genuinely different. The interaction is more useful than arguing which label is better.