This is a trading item or a component that was created using QuantShare by one of our members.
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Average Performance of a trading rule during that past N days
This function transforms any technical or trading indicator into a sort of adaptive indicator. In fact, it gives you the average one day performance when the rule you provided is true, for a specific number of past bars. To do so, the function calculates the one bar rate of change of the asset you are analyzing, it then detects, for each bar, all past bars where the trading rule provided is true. Finally, an average one-bar return is calculated for all these bars (The return of the next bar is calculated) and is assigned to the current bar.
Each trading bar will tell us exactly the average performance of a strategy that buys the asset when the rule is true and sell it when it becomes false. So, given any technical indicator, we can easily create a rule that tells us whether a technical indicator was profitable for a specific stock and a specific past period or not.
The following buy rule for example, instructs the application to enter a stock only if its Relative Strength Index value is higher than 70 and that at the same time this rule produced more than 0.1% average return during the past year.
buy = rsi(14) > 70 AND AvgPerfRule(rsi(14) > 70, 250) > 0.1;
As you might have noticed, the indicator name is "AvgPerfRule". The analyzed trading rule is provided in the first argument, while the second gets the lookback period or the number of trading bars to analyze.
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.
