Trading strategy types explained
Beneath the endless variety of trading setups sit a handful of underlying philosophies. Almost every strategy is a version of mean reversion, trend following, momentum, or breakout — and each one profits in a different market regime. Knowing which you're running, and whether the current market suits it, matters more than any single indicator.
The cleanest way to organise strategy types is by the bet they make about the next move. Continuation bets — trend following, momentum, and breakout — profit when a move keeps going. Reversion bets — mean reversion — profit when a stretched move snaps back. They are, in effect, opposite wagers.
Regime is the deciding variable
This is the crucial insight: continuation strategies thrive in trending, directional markets and bleed in chop; reversion strategies thrive in ranging, balanced markets and get run over in trends. The same setup that prints in one regime is a loser in the other. No strategy type works everywhere — each is a tool matched to a condition.
Holding time is a separate axis
Strategy type (the bet) is independent of holding time (the duration). You can run mean reversion as a scalp or a swing; you can trend-follow intraday or over weeks. Don't confuse the two dimensions — and remember holding time interacts with your prop firm's rules.
Why a portfolio — and why discipline — beats picking one
Because regimes shift unpredictably, betting everything on one strategy type means stretches where your style simply doesn't work. Combining complementary types — say a reversion strategy and a continuation strategy — smooths the ride, which is the logic behind running a portfolio rather than a single strategy. But the real differentiator across all of them is the same: a tested edge applied with mechanical, never-bored consistency. Style choice gets you in the game; discipline keeps you there.
Every strategy type is a bet on continuation (trend, momentum, breakout) or reversion (mean reversion), and each needs its own market regime. No style works everywhere — which is why a complementary portfolio, applied with consistent discipline, beats betting on one.
The style matters less than the discipline applying it
The free Playbook shows six rules-based strategies, each applied identically every time — no second-guessing the setup.
Get the PlaybookEducational content, not financial advice. No strategy style or indicator guarantees profits; each works in some market conditions and fails in others. All strategy figures referenced are hypothetical, from backtested data and Monte Carlo simulation; past and simulated performance does not guarantee future results. Trading involves substantial risk of loss.