Ensign Software - Alerts: Action Stop and Reverse

Q: Unfortunately, "Stop and Reverse" is not something I understand, unless there is a spot where one gets started and a direction one gets started in. I do see that the Woodie and the Sto have direction, but how does the template know this based on the Color Bars object?

A: The chart starts with the position Out. On the first signal to be Long, a Stop and Reverse selection will make the position Long the number of Quantity contracts, such as Long 1. When the signal to be Short is seen, the Long position is sold, and the Short position is put on. So now it is Short 1. Thus a sell of 2 was executed.

A simple Stop and Reverse signal could be the relationship of 2 moving average lines, where position is Long if the faster average is above the slower average, and vice versa. Signals to go Long are ignored if already long. Signals to go Short are ignored if already short. So internally, the direction is observed and the signal is acted on when it is changing the position, and ignored when it is in the same direction, for the Stop and Reverse action.

If the Study flag is True the position is Long, and if it is False the position is reversed to short.

Q: Maybe a simple way to ask my question: If I hired an assistant to pickup my packages for me, and my packages were either one mile to the left of my home at Lowes or one mile to the right of my home at the supermarket. And, I told my assistant to "Stop and Reverse", he would not know which direction to take.

A: In the Stochastic example, if K% is above %D the flag is true and the position is forced to be Long. If the flag is false, meaning K% is below %D, then the position is forced to be Short. The Long was reversed to Short, and vice versa. It is a REALLY SIMPLE concept and for some reason your mind is blocking the simplicity of it all.

In the Stop and Reverse action, the Flag represents the state of the trade. One is always in the trade, either Long or Short, and the Flag controls which state the trade is in. The Flag serves as the state of the direction. The flag for the Stop and Reverse action is a relationship and not a singular event. In your DYO designs you are designing signals that are True for a Buy event or True for a Sell event, and so your flags would never be appropriate for the Stop and Reverse selection.

Q: I am using the mechanism that was demonstrated in the classes and the newsletter. I have attempted many time to implement something like. "Get out if you are long or short and wait for the next signal"; but, as simple as it seems, I can not get the Sim to do what I want. Is there a DYO in the library that does this; I did some searching but could not come up with anything.

A: The Study Alert action would be Exit Any Position. This will get you out if you are long or short, and do nothing if you are already out. The EnsignStochastic template used that statement in the Exit at 4 pm rule. That rule was based on time and operated regardless of whether the position was long, short, or already flat.