One of the more important MESA8 indicators is the Crossover set.  There are a total of three indicator lines – the MESA8 Crossover Momentum line that measures the momentum across the period of the dominant cycle, the Crossover Plus Amplitude line that is twice the measured amplitude of the dominant cycle, and the Crossover Minus Amplitude line that is just the negative of the Plus Amplitude line.  These three indicators have been combined into a single subgraph to show the Momentum relative to the cycle amplitude.  If the momentum exceeds value of the Crossover Amplitude line in either direction, this signifies a trend movement and the direction of the trend.

We have chosen the EC Futures contract because it is well known that currency futures are best traded using trending type strategies. In this example we have built a very simple trading system based upon the crossover indicator concept.  If the Crossover Momentum line crosses above the Crossover Minus Amplitude line, this is a signal to buy.  If the Crossover Momentum line crosses below the Crossover Plus Amplitude line, this is a signal to sell.  Cycles-base trading in this example is ignored and the trading system is comprised of only the trending components.  We could have used the crossover below as a long exit condition if we did not want to go short, but the NeuroShell Trader automatically exits a long when a short entry condition is signaled, and vice versa when there are no exit conditions specified. Traders call this a "reversal" strategy.  In the training period, NeuroShell Trader finds the optimum tuning and bandpass parameters for the indicators.

The results of the backtest of this trading strategy are shown on the chart. The buy signals are blue upward triangles, and the sell signals are the red downward triangles. If you zoom in on one of these signals, you will see an X on the open of the next trading day. This is the date and price of the simulated fill. The NeuroShell Trader assumes you are looking at your chart at the end of the day after downloading another day of data. Any orders you place will be filled near tomorrow's open price.

To enter the Trading Strategy Wizard and examine the rules, right-click on the label at the top named "Trading Strategy". When the pop up menu appears, select "Modify Selected Trading Strategy." You will be placed into the end of Trading Strategy Wizard.

When you first enter the Wizard you will see that the backtesting produced a 21.7% annual return on account with 8 winning trades and 2 losing ones during the optimal backtest period. If you press the button labeled "Detailed Analysis" you will see a number of statistics for the out-of-sample backtest for the right half of the chart.  During this period the trading system produced $14637.50 profit (with no allowance for slippage, margin and commission).  We traded 1 contract with a point value of $125,000.  As with most trend following systems, there were only 33.3% winning trades.  However, the losing trades were quickly reversed, with the result that the Ratio of Gross Profit/Loss was 1.93.

Note:  This example uses “close” as a parameter for the Crossover indicators.  You may also use the MESA8 Price indicator, which is the average of the high and low, as well as any other price data stream.  You may want to experiment and use the price value that works the best in your trading system.