I created a prior Success Rate Calculator to help me quantify the success rate of my invite-only indicator "SB Master Chart". Happy with the results of the calculator, I decided to create a calculator for a random buy.
This is a table addon that calculates in real-time the success rate of a random buy. I think this simple calculation can give you a good indication if you want to invest in a stock and what the odds are for it being profitable at anytime during your holding period. A stock with a low score might be one that you stay away from.
There are two configurable options.
Lookback Success Calculations (Bars) This setting is used to determine what the success is for a random buy. For example. The script tracks purchases made at every bar and check the results [x] bars in the future to see if at any time during that time it closed above the buy cost basis.
For example if the setting is 5, we would want a close above our cost basis within 5 bars from the random buy. The longer you are willing to hold a stock, the higher you should set this setting. If you want to buy/hold a stock for 20 days, set it to twenty to see your odds of being profitable during that time period.
Lets use the daily chart as a quick example. If today the signal goes off and we have a settings of five, in five days (5bars) if there is a close above todays close, we count that as a success. If there is not, we count that as a failure.
Start Date Settings This setting is used to limit the amount of data we gather for testing. For example, we may want to only know how many successes we want since the start of the year. This is the default setting, you can set it for an earlier date in time if you wish to gather more data.
Future todo updates: Adjust cell color based on values. Right now its defaulted to green.
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Updated to include average gain. This will give the trader a better picture on where to set take profit.
I wanted to comment to say that one should not be misled by the high success rate, which goes higher based on the hold period. The success rate does not incorporate an average gain, which I may implement in future updates. The gains might be too small to take advantage of and its very likely that the trades that are not successful never become successful. Also random may not be as random as the title would suggest, this calculator is based of a buy, on every bar making it unbiased.
Common investing sense should prevail buy analyzing other indicators like RSI, MACD, STOCH, Bollinger, as well as fundamental analysis and considering other factors like dividents, earnings, and announcements.
Common investing sense should prevail buy analyzing other indicators like RSI, MACD, STOCH, Bollinger, as well as fundamental analysis and considering other factors like dividents, earnings, and announcements.