Mechanical trading systems have many components. The main components usually include entry signals, exit signals, trade management actions like moving stops or moving targets, scaling in, scaling out, position sizing, profit targets, bar period, market traded, trading times of day and so on.
Fast results, easy to execute
Part of the tool box, is not a replacement for a full backtest.
Evaluating the effectiveness of the entry signal on its own
Adding a stop/target to the mix
The ESA is intended to be an entry signal analyzer. Meaning it's intended as a tool to test the edge of the entry signal component of the trading systems on its own in isolation as much as possible.
Isolation meaning that you remove any trade management, signal based exits, etc.
Its intended for answering the questions - how strong is the signal (how much does it go in my favor vs against me) and, how long does it last? Once you start adding exit criteria you start adding an exit component to that which important and useful but was it takes the tool in a different direction and closer to a backtest territory.
Related Reading Material
“Way of the Turtle”, Curtis Faith
“Building Winning Algorithmic Trading Systems”, Kevin J. Davey
Signal References
The study requires a long signal reference and a short signal reference.
The signal reference are simply subgraphs that signal an entry signal.
Sierra Chart provides multiple methods to create these signals, for example:
Spreadsheet formulas
Color Bar Based Alert studies
ACSIL based custom studies
You can reference studies and subgraphs that you create yourself or you receive from someone else.
Defining Iterations
Trade Simulation
Entry
Exit
PnL
Summary table
Viewing trades for a specific iteration
Exporting Trades for a Specific Iteration