Edge Ratio for PNL Curve?
- Thread starter Maverick1
- Start date
It sounds that with a few algebraic manipulations, you will get win:loss or a profitable % figure.
Perhaps, you just want to see the skew of the return distribution. Check the histogram of returns. y-axis = dollars or percent, x-axis = no of trades.
Determine if it is positive or negatively skewed. Hope that helps.
Perhaps, you just want to see the skew of the return distribution. Check the histogram of returns. y-axis = dollars or percent, x-axis = no of trades.
Determine if it is positive or negatively skewed. Hope that helps.
My mistake X axis is dollar or % and Y is no of trades. From the distribution, you can make an easy guess what type of trading is being done.
positive skew - break out, trend following, or option buying
negative skew - mean reversion, option premium selling
Now imagine the following graphic as the cumulative MAE or MFE.
positive skew - break out, trend following, or option buying
negative skew - mean reversion, option premium selling
Now imagine the following graphic as the cumulative MAE or MFE.
Thanks Xandman. Yes, from your graphic, it seems to show mean reversion.
Can you clarify what you mean by cumulative MAE or MFE? Are you talking about individual trades excursions that are summed up?
Cool, thanks.
As you already know, MAE and MFE, are scatter plots which are supposed to show the relationship between 2 variables.
You can express the 2 data variables in a 3 colored histogram for favorable exc., unfavorable exc. and actual PnL. Sounds a bit like PnL variance, doesn't it?
There is not much new under the sun. But, I have to print out a glossary of performance stats definitions every time I look at new software. I would rather stick with industry standard (even marketing standard) formats for presentation and analysis. It is post-trade analysis after all.