In quantitative trading, the storage ratio indicator is a tool used to evaluate the lock-in status of chips and market sentiment. It analyzes the proportion of chips that are "stored" or not involved in transactions within a specific cycle to help determine the potential strength and turning point of the price trend. Understanding its source code logic can help traders build and improve strategies more independently, instead of blindly relying on ready-made indicators.
What is the basic principle of the storage ratio indicator?
Tracking "inactive" chips is the core idea of the storage ratio. Its calculation is generally based on trading volume and price data. A common method is to set a benchmark price, such as the recent average cost. When the latest price is higher than this benchmark and the trading volume is relatively small, it will be regarded as a partial Chips are "sealed" due to profit expectations. On the contrary, when the price drops, the trading volume shrinks, which may mean that the hold-up is unwilling to sell. This is not an official data released by an exchange, but a modeling and interpretation of market behavior through algorithms.
The mathematical expression is often associated with weighting or smoothing historical volume and comparing the difference between current volume and a baseline level. For example, maybe it will calculate the percentage position of the current trading volume below the average trading volume of the past N days, and then combine it with the position of the price relative to the moving average to make a comprehensive judgment. Understanding this principle is a prerequisite for reading source code or writing source code.
How to obtain or write the sequestration ratio indicator source code
For ordinary investors, it is a feasible way to write directly in the formula system in trading software such as Tongdaxin and Wenhua Finance. Taking a less complex idea as an example, the source code may include functions for calculating moving averages, as well as functions for comparing the relationship between trading volume and the average line, etc. For example, in some software, the formula may include "VOL/MA(VOL,20)" to calculate the volume ratio, and it needs to be combined with "CLOSE/MA(CLOSE,60)" to define the price strong area, and then output the storage ratio curve through logical judgment statements.
A more rigorous construction requires consideration of multiple factors, such as distinguishing between large and small orders, combining turnover rate with it, etc. For traders with strong programming skills, using libraries such as Python's TA-Lib can more flexibly encapsulate calculation logic and conduct backtesting. The key point is that the source code must clearly define the conditions for "storage", which will directly determine the sensitivity and effectiveness of the indicator.
How to apply the sequestration ratio indicator in actual transactions
In practical applications, storage ratio is often used as an auxiliary tool. If the indicator value continues to rise, it indicates that the number of locked chips is increasing, which may mean that the upward trend is in a healthy state and the selling pressure is relatively light; however, if the price reaches a new high, but the storage ratio indicator shows a top divergence (that is, the price is rising, but the indicator is falling), then this indicates that the locked chips are beginning to show signs of loosening, and the upward momentum may weaken. On the contrary, a bottom divergence appears at the end of a decline, which may indicate that selling has dried up and there is nothing left to sell.
Investors should note that this indicator does not react immediately and has hysteresis characteristics. Moreover, under different market conditions, such as unilateral market and volatile market, the signal display effect it sends is different. For example, when the market fluctuates violently due to emergencies such as "a man almost ran out of his house after going out for more than ten minutes", any model constructed from historical data may lose effectiveness in a short period of time. It should be used comprehensively in conjunction with other tools such as trend lines, key support and resistance levels, and cannot be relied upon as a single basis for decision-making.
What misunderstandings should be paid attention to when using the sequestration ratio indicator?
The biggest misconception is to regard it as a "magic tool for prediction". Any technical indicator is based on statistics based on historical data. The same is true for the storage ratio. It reflects the established situation of chips that has become a fact, rather than future trends. Dynamic, secondly, the setting of parameters is extremely important. Whether the calculation period N is 20 days or 60 days, the final results are very different. They need to be adjusted according to the activity of the trading variety. There is no universally applicable best parameter for all.
Don't over-optimize. When writing or modifying the source code, if you add too many complex conditions in order to perfectly fit a certain period of historical market conditions, it will often cause the model to lose its effectiveness in real trading. The real value of the indicator lies in giving a structured viewpoint to observe the market, rather than giving an exact tradable point. Just like paying attention to why electric bicycles are limited to 25 kilometers per hour, understanding the safety considerations behind the rules is far more critical than simply arguing about the size of the numbers.
For those friends who are interested in exploring quantitative trading in depth, would you rather write and test indicator source code yourself, or would you rather delve into mature classic theories first? Welcome to share your opinions in the comment area. If you find this article inspiring, please give it a like and support.
