Reversal Strategies

Now that we have gained confidence with backtesting and validating trend strategies, let’s move on to a different trading approach: reversal. The goal of this chapter is for you to understand the market rationale behind a reversal strategy, to learn a methodology to select and program technical indicators for such logic, and to program related strategies and backtest them using TradeStation workspaces, charts, the Print Log, and Excel as unique tools for validating multiple assets.

We will cover the following main topics:

• The market rationale behind a reversal strategy
• Writing a reversal strategy
• Backtesting long reversal strategies
• Backtesting short reversal strategies