What is the most demanding exit strategy for mean reversion in momentum trading?

The most demanding exit strategy for mean reversion in momentum trading is exiting when momentum enters the opposite zone. This strategy requires a trader to wait for a significant reversal in momentum that indicates a shift in market sentiment, as measured by momentum indicators.

By exiting when momentum enters the opposite zone, the trader is adhering to a more stringent criterion that implies a complete change in the prevailing trend. This approach engages a more proactive risk management stance and acknowledges that market conditions may have shifted considerably. It prepares traders to capitalize on significant price movements resulting from changes in momentum.

This method can capture larger moves back to mean values after momentum has transitioned, potentially maximizing the strategy's effectiveness. It reflects a comprehensive understanding of market cycles and allows for positioning aligned with the underlying market trends when they pivot sharply. This exit strategy not only focuses on immediate reversals but also considers the broader context of market dynamics.