Ben, I did some back testing with this indicator, along with a couple other of my favorite for confirmation.
My chosen indicators were RSI, MACD, CAPPOT, and BigHand:
Next, I picked a random past time window to to work from:
From there, I started going through random tickers and looking for good setups. The criteria I was looking for looked something like the following:
- Cappot issued a "Buy" signal recently
- Big hand bullish cross, or at a minimum not negative
- MACD recently crossed up (or about to)
- RSI not overbought and preferably above 50
Once I had found several tickers with matching criteria, I then headed over the ToS "Analyze -> ThinkBack" feature.
For those unfamiliar, this feature allows you to set the date to some time in the past in order to simulate trades from that time.
I set the start date in ThinkBack to match the end date of the time window I set up at the beginning.
Next, using the list of matching tickers, I simply bought 10 just out of the money calls for each one. My only criteria for selecting the options was that I wanted to have at least 30 days on monthly opex until expiration. So I chose an expiry of 12/21/2018 which would give 57 days until expiration.
Here is what the final list looked like once I finished buying calls for each ticker. Notice the P/L column on the right hand side, every ticker has a P/L of $0 since I just purchased the options. Also notice the Date is 10/25/2018 on the Backtrades section at the bottom.
Next, I started rolling the date forward to see how the options prices would change over time. First look here is a couple of days later at 10/27/2018.
Finally, the day before expiry on 12/21/2018. Here many of the options have gone from positive to negative. This isn't surprising since, around this time is when the market began to decline rapidly. However, there were plenty of opportunities to take profits along the way on most of these.
From my testing, this definitely looks like a great way to find good setups. That being said, this is still anecdotal, and perhaps I just luckily chose a really good time to buy based on market conditions.
Edit: Based on my comment about just luckily picking a good time, I went back and inserted $SPY analysis for the same expiration dates to analyze how these would perform against the larger index.