Someone proposed if I thought that keeping track of MFA and MAE, Maximum Favorable Excursion and Maximum Adverse Excursion respectively, would be useful to NFV.
The answer in this case imo is no. This touches on the philosophical aspects of any model. Take NFV for example, it outputs a number. What does that number give? Well, it gives price, but I am asking, translated in scientific terms, what does it give? It gives position.
If you believe that markets have their own "Quantum Mechanics", then if you believe that NFV gives a very accurate value for the position of the market, then by the market analogy of the Heisenberg Uncertainty Principle, we must be uncertain about the momentum of the very same market as seen by this model. This basically mean that we would have very little knowledge of the volatility around the equilibrium point. So we trade SPX, not VIX. If you think about it, it is another reason that you cannot trade an equilibrium model with just one trade. It is more of a campaign against not just price reverting to a "mean", but the momentum that takes it away from that equilibrium as well. Betting "chains" of some sort are a necessity in this case.
So you see, to an equilibrium model, it is somewhat useless to worry about what we are blind to, MAE and MFE - instead we deal with this complexity with add/remove chains. Alternatively, we can only hedge it, at best, or if I had a model for VIX, I could conceivably trade the interrelationship between where NFV is telling me SPX "should be" in VIX terms, and then make a play that way against VIX. It should be obvious now imo as to why chains (the add/remove distance from each other) are a function of VIX, BTW.
