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Maximum Favorable Excursion (MFE) % and optimization strategies
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Maximum Favorable Excursion (MFE) % and optimization strategies

  #21 (permalink)
Market Wizard
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choke35 View Post
True. That's why I use the (net) result of my daily trades for grading. This also averages out - to some extent -
the number of trades which largely depends on your intraday time frame / trading style. (A friend of mine has a
more extreme method: He uses PAT on volume bars and (automatically) tracks his yield for every swing where
he has an open position ... which comes close to your chart B.)



The Average Daily Range (ADR) simply averages the range of x periods irrespective of gaps. ATR also includes the
gaps in the average.

I see... thank you.

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  #22 (permalink)
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xplorer View Post
Thank you Tap In. Perhaps I use different terminology, but what do you mean by 1R, 2R.. etc? R for 'reward'? Are you talking about targets?

R stands for initial risk. If your initial risk is 15 ticks, price moving 15 ticks in your favor would be 1R, 30 ticks would be 2R, and so on. To be more precise, I actually add one tick to initial risk to account for limit fills. So, a trade with initial risk of 15 ticks would require movement of 16 ticks in my favor to qualify as 1R, 31 ticks to qualify as 2R, etc.

Every trade is logged, and a running total of the most recent 20 trades are periodically analyzed to determine how often, in percentage terms, price reaches each milestone. During these 20 trades I may have managed well, managed poorly, or whatever. That part doesn't matter (well, ultimately it matters, but not during method development). It's all about answering the question, "does my method have potential?" I have found that I make money when price gets to 1R 65% of the time or more. Less than that and it becomes difficult to trade. Making money in trading requires that price move in our favor a lot more than it moves against us, and it helps to know if that is happening or not.


Last edited by Tap In; January 28th, 2016 at 01:00 AM.
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  #23 (permalink)
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are there tools available for ninjatrader which can keep a record of the MFE and MAE of each trade you make?

I'm particularly interested in MAE.

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  #24 (permalink)
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jonc View Post
are there tools available for ninjatrader which can keep a record of the MFE and MAE of each trade you make?

I'm particularly interested in MAE.

I kept a manual track of it, especially if you also want to calculate the average MAE/MFE
it makes sense to do that per trading strategy/robot/method

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  #25 (permalink)
Market Wizard
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Tap In View Post
R stands for initial risk. If your initial risk is 15 ticks, price moving 15 ticks in your favor would be 1R, 30 ticks would be 2R, and so on. To be more precise, I actually add one tick to initial risk to account for limit fills. So, a trade with initial risk of 15 ticks would require movement of 16 ticks in my favor to qualify as 1R, 31 ticks to qualify as 2R, etc.

Every trade is logged, and a running total of the most recent 20 trades are periodically analyzed to determine how often, in percentage terms, price reaches each milestone. During these 20 trades I may have managed well, managed poorly, or whatever. That part doesn't matter (well, ultimately it matters, but not during method development). It's all about answering the question, "does my method have potential?" I have found that I make money when price gets to 1R 65% of the time or more. Less than that and it becomes difficult to trade. Making money in trading requires that price move in our favor a lot more than it moves against us, and it helps to know if that is happening or not.

Thank you Tap In

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  #26 (permalink)
Market Wizard
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jonc View Post
are there tools available for ninjatrader which can keep a record of the MFE and MAE of each trade you make?

I'm particularly interested in MAE.

NinjaTrader keeps automatically a record of both MFE and MAE every time you take a live or a sim trade.

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  #27 (permalink)
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You are right. I did a check on the account performance tab. Didnt know it there even though I had been using NT for number of years.

Thanks, this is really helpful.

It would be even better if they can show the MAE of a scaled in position with multiple contracts.

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