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The Buy Sell Simulation Indicator is a technical analysis tool that allows you to transform any buy and sell rules into a measure of the performance of a trading strategy that buys a stock given the buy rules you have specified and sells it given your sell rules.
The buy sell simulation indicator will calculate for each bar, the average performance of trades that meet your buy/sell criteria within a specific number of past bars. For each bar, you will know whether a strategy is profitable or not for a specific stock and trade or use this information to create another rule.
You can create a trading rule that:
- Buy a stock if its 30-bar simple moving average is 1% above the close price
- Buy the stock only if the above rule was profitable during the past 300 days (Using the following sell rule: Sell a stock if its 30-bar simple moving average is below the close price)
The formula that you will need to type to create such a strategy is:
rule1 = sma(30) > 1.01*close;
buy = BuySellSim(rule1, sma(30) < close, 1, 600) > 5; // Strategy performance higher than 5%
The first argument corresponds to the buy rule, the second to the sell rule and the last one is used to specify the number of past bars (lookback period).
The third argument is the number of trades' threshold and it allows you to specify a minimum number of trades. The trading indicator will return 0 if for a particular bar, the strategy generated less trades than the minimum number of trades you have specified.