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Adaptive Trading Indicator based on the Return of Past Trades
Imagine you have a trading rule that turns itself off if the average return of the last trade (or the last few trades) that were generated by this rule are negative or below a specific threshold.
This is exactly what this technical indicator will allow you to do.
You tell him which trading rule to test, the number of past trades to consider, the number of periods to use in the return calculation (Sort of N-Bar stop) and the lookback period to search for past trades. After you enter these inputs, the indicator will tell you for each period, the average return of the past trades.
Example: (The function name is PastTrades)
rule1 = cross(close, sma(30)); // Price crosses above its 30-Bar simple moving average
ruleT1 = rule1 and PastTrades(rule1, 10, 2, 300) > 0;
buy = ruleT1;
"ruleT1" variable returns a signal if "rule1" is TRUE and if, at the same time, the average return of the last 2 trades generated by "rule1" are above zero. In the above example, a trade return is calculated based on the next-bar open price as entry price and the next 11-bar (10 + 1) open price as exit price.
