Backtesting short strategies

Now, we’ll attempt to set up a reversal short strategy. Here, we need to make a few considerations: from an algorithmic programming standpoint, a short strategy is simply a long strategy written with conditions reversed. However, from a financial market perspective, it’s not the same thing. The stock market trends upward around 90% of the time, so the strategy we’re outlining is purely demonstrative.

In this section, we are going to do the following:

• Run a multiple-sensitivity analysis on the SPDR S&P 500 ETF Trust (SPY)
• Export data into an Excel file and create an ROA heatmap
• Select the best input set

Running multiple-sensitivity analysis on the SPY

Let’s run an optimization with the settings shown in Table 5.2:

Inputs	Values
Dir	-1
...