#twitter-follow { border: 0;position: fixed; top: 240px; left:0;} #live-support { border: 0;position: fixed; top: 370px; left:0;} #knowledge-base { border: 0;position: fixed; top: 170px; left:0;}

 by bug man, 3348 days ago

Let us say you have a trading system that contains three trading rules, imagine if you have a indicator that acts like a backtester or simulator; it analyzes each trading rule before it is applied to a stock or a security and tells you whether this rule was profitable for that stock during a specific number of bars. If the rule is not profitable then the trading indicator disables it.

If you have never used the Buy Indicator, maybe it is time to start using it. The buy indicator can do exactly what I have described above.

The strategy indicator is an adaptive indicator that uses the same logic as the buy indicator but returns a different time series. Instead of returning the performance of a strategy that buys a stock when the provided rule is TRUE and sells it after a given number of bars, this indicator returns the percentage of winning trades that are above a given threshold. You can apply this indicator to any trading rule and in any market (Stock Market, futures, commodities, currencies).

Here is a simple example:
You would like to create a trading rule that buys a stock when its RSI or relative strength index crosses above 30 (cross(rsi(14), 30)).
The following indicator allows you to test the profitability of this rule by returning for each trading day the percentage of winning trades (Buy when RSI crosses above 30 and sell after 10 bars) that returned more than 1%. This function also instructs the application to return the result only when there are at least 8 trades during the 300 bars lookback period.
SIndicator_PP(cross(rsi(14), 30), 10, 1, 8, 300)

If for the bar number 1000 the function returned 100%, this means that for the previous 300 bars (700-1000), all trades that were generated by this strategy had a performance that is higher than 1%.

To apply this indicator to your trading rule, you can use the following formula:
cross(rsi(14), 30) AND SIndicator_PP(cross(rsi(14), 30), 10, 1, 8, 300) >= 60

This tells the trading software to disable the RSI crossover rule when less than 60% of the trades generated by its corresponding strategy had a higher return than 1%.
The result is that the RSI crossover will be applied to some stocks for certain bars and not to others.

This strategy indicator is a very powerful tool and it can be used to develop trading systems and strategies that outperform the market in bull and bear periods.

The adaptive strategy indicator (SIndicator_PP) parameters are:
Rule: The trading rule to analyze
Bars: The number of bars to hold the trade or position
Threshold: The return threshold
Lookback: The lookback period used to backtest the strategy

What is this?

 Type: Trading Indicator Object ID: 551 Country: All Market: All Style: All

Related objects
Show All
Trend Strength Index (by swalk10, uploaded several months ago)
No notes
 67
Elliott Wave Oscillator (by Caleb, uploaded several months ago)
No notes
 60
Fractal Adaptive Moving Average - FRAMA (by clonex, uploaded several months ago)
No notes
 61
No notes
 104
Put/Call Ratio for Individual Stocks (by QuantShare, uploaded several months ago)
No notes
 98
Support & Resistance Breakout Indicator (by Tom Huggens, uploaded several months ago)
No notes
 62
CloseHL Percent Rank Oscillator (by Brian Brown, uploaded several months ago)
No notes
 67
Number of reviews
Average rate
Click to rate this item
Number of rates the current object received
Report an object
if you can't run it for example or if it contains errors
Click to report this object

 Random Blog Posts How to create your own technical analysis indicators Create a stock index or a trading indicator using the composite tools Create a trading strategy using the money management tool - Part 2 Create a trading strategy using the money management tool - Part 1 How to create a market timing system - Part 3 Correlation of market indicators How to create a market timing system Backtesting Process Show All

Number of reviews
Average rate
Click to rate this item
Number of rates the current object received
Report an object
if you can't run it for example or if it contains errors
Click to report this object