Modified Sharpe Index for Long-Only Stock Selection

Summary

This long-only strategy uses a modified Sharpe index to select stocks, with a moving average as a price filter. It enters when the index is above a threshold and the closing price is above the 254-period simple moving average. The author suggests applying it to a selection of roughly 20–30 stocks and says a threshold of zero might also be usable, though a threshold of one is intended to reduce false signals.

Positions exit if price falls below the moving average, at periodic quarterly checks when the index no longer clears the threshold, or after about a year. The included implementation expresses these rules through indicator calls and bar-count conditions. The document provides no backtest, returns, risk measures, or comparison with alternatives, so it does not establish profitability. The indicator itself is referenced as a separate custom study, and the code’s parameter declarations are commented out, leaving key settings such as the threshold and holding period dependent on external configuration.

Key ideas

• The strategy takes long positions when the modified Sharpe index clears a threshold and price is above a long-period moving average.
• It uses a moving-average break, quarterly indicator reviews, and a maximum holding period as exit conditions.
• The author recommends deploying it across a selection of roughly 20–30 stocks.
• The document offers no performance evidence, and the custom Sharpe indicator is not defined in the provided material.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.