Entry metrics

Discussion in 'Strategy Development' started by PetaDollar, Nov 22, 2003.

  1. PetaDollar

    PetaDollar Moderator

    What are some quantitative measures of how good a system's entries are?

    One i'm using right now is max favorable excursion (MFE) divided by risk (defined by initial stop loss). For N entries, sum the MFE's, then divide by N*(stop loss).

    (Also, I max out the MFE at 10 NQ pts; i'm trading very short term and would close all contracts by +10.)

    For one of my NQ trading methods I have a ratio of 1.29.

    For another method (which I think is of lesser quality) I get
    a ratio of 1.15.

    I would like to hear from some system traders what values they get for this ratio. In other words, what's considered good?

    Also, what should you get for this ratio for random entries? I'm guessing a number slightly less than one, due to the 0.5 point spread.

    p.s. if you want the details about my entry method check out my journal.
     
  2. PetaDollar

    PetaDollar Moderator

    I just noticed, this ratio (MFE/risk) is dimensionless, so we can compare different instruments.
     
  3. Hi Pete,

    how do I get MFE ?

    Regards, Ralf
     
  4. ptt

    ptt

    comparing your entries to random entries is a good way,

    acrary has posted about this before
     
  5. It's the difference between the best price you could have closed your position at, and your entry price. You need to also have a hard exit critereon (like an "x" point stop loss) to find it. Ex: long in the NQ at 1370.00, 3 point stop loss, you would find the highest price the market reached (minus a tick) before price got to 1367.00 (three points against). Then subtract your entry price of 1370 from that highest price (minus a tick).