When you fill in the details of a trading rule, such as a Long Entry Rule, there is the "I want this to NOT be true" option.
Moreover, generally there are always opposite rules available. E.g.:
- Close Above Simple Moving Average
- Close Below Simple Moving Average
So what's the difference between choosing:
- "Close Above Simple Moving Average" and using the "I want this to NOT be true" option; and
- "Close Below Simple Moving Average"
?
Well, there is a slight one.
When the Close is below the SMA, both option #1 and #2 are true.
When the Close is above the SMA, both option #1 and #2 are false.
When the Close is exactly the same as the SMA, option #1 is true, while option #2 is false.
Using "I want this to NOT be true", TS calculates the result of the rule as if you did not want to use this option, then it takes the opposite of that result.
So when the Close equals the SMA, no, it's not above the SMA so the normal result is false, then taking the reverse, the result is true.
In a lot of cases, you can use both methods interchangeably. E.g.:
- One Simple Moving Average Is Above Another
- One Simple Moving Average Is Below Another
In this case there will be no difference between simply choosing the other option, or instead using the "I want this to NOT be true" option.
So you will have to think about your particular situation.
But here's one to consider - the MACD Histogram cross from Oversold into Overbought.
For this one, you choose the following Long Entry Rules:
- "MACD Histogram In Oversold", and set the Bar Offset to 1, meaning you want this rule to have been true 1 bar ago; and
- "MACD Histogram In Overbought"
These two rules combine to allow Long orders to be placed only when the MACD Histogram crossed from Oversold into Overbought.
But what if the value of the MACD Histogram 1 bar ago was exactly zero? In this case the MACD Histogram is neither in Overbought, nor in Oversold. So while the MACD Histogram has legitimately crossed from Oversold into Overbought, TS will disallow the trade because it thinks the MACD Histogram was not in Oversold 1 bar ago.
(Remembering that TS is in fact doing exactly as you told it to do).
This situation is not going to happen very often. If it did, all that happens is you miss a trade. But, if you're worried about it, set the Long Entry Rules to this:
- "MACD Histogram In Overbought", use the "I want this to NOT be true" option, and set the Bar Offset to 1; and
- "MACD Histogram In Overbought"
Doing it this way effectively changes the entry rule from being "enter when the MACD Histogram crosses from Oversold into Overbought" to "enter when the MACD Histogram crosses from not in Overbought into Overbought".