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The short indicator tells you whether to short the current security or not based on an indicator previous performance.
For each bar, this indicator will calculate the performance of another indicator for the past bars. It will simulate a short and cover after n-bars when the provided indicator gives a signal.
Example: let us say we are in bar number 1200. We provide the buy indicator with the following indicator: rsi(14) < 30, with 20 as holding period and 500 as lookback period.
The short indicator will now calculate, for the bar number 1200 minus 500 (800) to bar number 1200 minus 20 (1180), the performance of a strategy that shorts the current symbol when rsi(14) < 30 and sells it after 20 bars.
This strategy return or performance will be used as the short indicator value for the bar number 1200. We repeat then the above steps for the following bars.
The short indicator will tells you whether a specific indicator is profitable or not and allows you to create dynamic trading rules that generate signals based on other indicators signals and their profitability over time.
Graph Interpretation: if the short indicator rise over time then it means that the tested indicator is becoming more profitable, while a decrease in the short indicator value means that the indicator is becoming less profitable.
When the short indicator value is zero, it means that the tested indicator didn't generate any signal during the lookback period or that its average performance is zero.
Original idea and code: BugMan http://www.quantshare.com/item-120-buy-indicator
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
