MFE and MAE Analysis

Quote from bespoke:

Thanks. I'll check that out.

By looking at my MAE and MFE charts, I decided to test entering into positions at +2% and -2% for the data set above (2007, 100 of the highest volume stocks). Profit factor for positions taken at -2% was 8.2, and for +2% was 3.3 (original at 0% is 4.9). About the same type of increase/decrease for other years tested as well. Looks like I'll try some position sizing strategies so I can scale in. I don't know what the overall profit factor is because my software isn't yet set up to average up/down like that. If it doesn't increase I suppose it's not worth averaging. Will let you know when I'm not too burnt out to do some programming.
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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.
 
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.
 
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