But maybe Mark Douglas, author of "Trading in the Zone" can explain it better than I can:
Because of this fact, I try to look at my charts from the opposite perspective, and I do this by looking charts upside down. For example, when I trade the TSX, I can look at two ETFs, one that does twice the performance of the TSX, and the other that does twice the inverse of the TSX:
These charts are basically mirror images of each other. When one chart is overbought, the other is oversold, and so on. Currently I am long the TSX, but I will also keep an eye on the short TSX fund just to see things in another perspective.
I will ask myself if I would be satisfied holding the short fund right now. I will try to look and see if there is anything positive about the short fund. If so, then perhaps holding the long fund may not be such a good idea.