Two indicator

2. Reversal Strategy

Objective: Trade potential reversals when the Net Score reaches extreme levels and shows signs of turning.

Steps:

• Identify Overbought/Oversold Conditions:
  • Net Score above upperLevel (75) indicates a potential overbought condition (bearish reversal possible).
  • Net Score below lowerLevel (-75) indicates a potential oversold condition (bullish reversal possible).
• Look for Divergence:
  • Check for divergence between the Net Score and price:
    • If the price makes a higher high but the Net Score makes a lower high, it’s a bearish divergence (potential reversal down).
    • If the price makes a lower low but the Net Score makes a higher low, it’s a bullish divergence (potential reversal up).
• Entry:
  • Buy (Long):
    • Net Score is below -75, but starts to rise and crosses above the Signal Line.
    • LazyLine is red but flattens or starts to turn green.
    • Enter on a bullish price action signal (e.g., a hammer or bullish engulfing candle) near a support level.
  • Sell (Short):
    • Net Score is above 75, but starts to fall and crosses below the Signal Line.
    • LazyLine is green but flattens or starts to turn red.
    • Enter on a bearish price action signal (e.g., a shooting star or bearish engulfing candle) near a resistance level.
• Stop Loss:
  • Place a stop loss above the recent swing high (for shorts) or below the recent swing low (for longs).
• Take Profit:
  • Target the 0 level of the Net Score (neutral zone) or a key support/resistance level.
  • Alternatively, exit when the Net Score crosses the 0 level or when the LazyLine changes color.