The Omega Ratio was authored by Frank A. Sortino. It is designed to evaluate how well an investor is compensated for the risk taken. The higher the Omega Ratio the better the instrument’s performance. The main ingredients are current price and a prior price which are adjusted with the user defined safe margin return. The user must select linear bars but may change the input (close), period length and a margin value. This indicator’s definition is further expressed in the condensed code given in the calculation below.
How To Trade Using the Omega Ratio
The Omega Ratio may be used to evaluate a instrument’s performance. No trading signals are calculated.
How To Access in MotiveWave
Go to the top menu, choose Study>Performance>Omega Ratio
or go to the top menu, choose Add Study, start typing in this study name until you see it appear in the list, click on the study name, click OK.
Important Disclaimer: The information provided on this page is strictly for informational purposes and is not to be construed as advice or solicitation to buy or sell any security. Please see our Risk Disclosure and Performance Disclaimer Statement.
//input = price, user defined, default is close
//period = p1, user defined, default is 30
//mar = margin, user defined, default is 5 percent
//pow = power
//index = current bar number
BarSize bar = getBarSize(); if (bar.getType() == BarSizeType.LINEAR) barMin = bar.getInterval(); else return; minPerYr = 60*24*30*12; priorP = price[index-p1]; mar = mar /100; //convert percent to decimal barsPerYr = minPerYr/barMin; th = Math.pow((1 + (mar)), p1/barsPerYr) - 1; //minium acceptable return/period compounded ret = (price/priorP)-1; Plot: omega = omega(index, p1, th, ret); .... Method omega(int index, int period, double th, Object key) iprice = 0, upSide = 0, dnSide = 0; for (i = index-period+1; i lessThan=index; i++) iprice = price[i]; if (iprice lessThan th) dnSide = dnSide + (th - iprice); endif if (iprice moreThan th) upSide = upSide + (iprice - th); endIf endFor if (dnSide != 0) return upSide / dnSide; else return null; endMethod ....