NOTE: In NeuroShell Trader, open the chart named “Example 6 – Reversal Unoptimized Crossover” which is the basis for following example:
This example is just like Example 5, except that we have short rules to try and profit on the down trends as well as up trends. We just moved the Long Exit rule to the Shoert Entry tab instead. Note that now we have no Exit conditions. If NeuroShell sees no exit conditions, it goes directly from long to short (called a “reversal”).
On the trading strategy you can see the signals are a little different. The first one on the chart is a downward pointing solid red triangle for short entry. The second one is an upward pointing solid blue triangle outlined in red. This signals that the system reversed from short to long in one step, covering the short at the same time the long was entered. This is accomplished with many brokers by buying back twice the short position.
You can actually accomplish reversals in a dropping market even with the old stock uptick rule. Lets say you want a 100 share position. When you start out long, you go long 200 shares and short 100 shares. That’s net 100 long. When you want to go short, you sell 200 shares. That’s net short 100. When you want to go long again, you buy 200 shares. Etc.
Double click on the Trading Strategy legend to see the trading strategy itself. You can go backward in the Wizard to examine the conditions.