Estimate a Trade Signal edge via the e-ratio

Discussion in 'Automated Trading' started by JezLiberty, Nov 2, 2009.

  1. Not sure how to handle this but I would like to start a thread that is relevant to 2 forums...

    I have started a thread discussing the edge ratio in there:

    PS: if you know a way to link a thread to multiple forums to avoid duplication please let me know...
  2. I'm sure the moderator would prefer you select the single most suitable thread.
  3. looks like it since my other thread has gone - with the initial message:

    I was wondering who uses the e-ratio in their strategy research and what your experience of it is?

    It sounds like a great tool to test a signal independently from anything else (ie position sizing, exit, etc.) and focuses solely on the entry signal. Whereas to test a system the exit always has an influence on the overall performance

    Basically the e-ratio only measures how well a trade could be doing after a signal is generated versus how bad it could do (ie clever ratio of overall MFE and MAE).
    The formula to calculate the e-ratio is fairly simple..

    It does not look like the ultimate testing strategy but like a very good addition to a trading system developer toolbox