MFE and MAE Analysis

Discussion in 'Strategy Development' started by bespoke, Feb 1, 2008.

  1. Tums

    Tums

    <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=1776770">
     
    #11     Feb 3, 2008
  2. Tums

    Tums

    <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=1776772">
     
    #12     Feb 3, 2008
  3. There is nothing special about 2%, it may be overfit to historical data. You need to adjust variables according to current volatility. Fixed values don't work in the long run (cost me to learn this fact two years ago). One day 2% may sound like a small value, a few months later it may look like a big move. Similar thing happened to me when I played indiscriminate opening range breakouts with fixed values, everything worked nice until volatility shrank and the followthrough disappeared.
     
    #13     Feb 3, 2008
  4. Surfeur

    Surfeur

    can you tell me how you calculate the MAE and MFE ?
     
    #14     Feb 3, 2008
  5. bespoke

    bespoke

    Thanks for the charts Tums. Good info.


    Surfeur, it's the max a position goes against you and for you before you close it. No calculation.


    As for the ATR, it improved my profit factor (4.9 to 7.2!)/ percent gain per trade/ win ratio/ etc. There is only one variable I can change in my strategy and it's a trigger threshold. So now I'm using a simple linear function to put ATR and sensitivity together (though I'm sure it could be related better). I'll keep experimenting, hopefully without curve-fitting. I don't know why I never used ATR before....

    Thanks for the help and suggestions.
     
    #15     Feb 4, 2008