For example, we could use it to quantify the edge gained from a donchian channel breakout entry signal. The e-ratio quantifies the edge by calculating the overall amount trades go in your favor versus the overall amount trades go against you. The higher value the value of the e-ratio, the more trades move in your favor — giving you a good indication of the edge measured. Take all the trades generated by the entry signal.
Close each trade after a given duration of n days. Calculate the e-ratio based on data from all trades formula detailed in 4 steps below. This gives you the e-ratio for a trade duration of n days. Repeat the operation for various values forex mae n to forex mae the e-ratio curve as a function of the number n of days — as illustrated below: The e-ratio of the entry criteria is plotted above.
The higher forex mae value of the e-ratio, the better the edge. In the instance above the day e-ratio is 1. Maximum Excursions are the maximum amount the price goes against you Adverse or in your favor Favorable during the trade.
MAE is calculated between the entry price and the lowest forex mae during the trade. MFE is calculated between the entry price and the highest price during the trade. Note that both values are positive. To be able to compute the e-ratio across different markets, the Excursion values should be normalised to a forex mae denominator — such as a unit of volatility. The Average True Range is a forex mae measure of volatility.
In many systems it is forex mae used to drive the position sizing, making it really relevant. This gives you comparable values across all markets and conditions.
Repeat the operation for the MFE values. The higher the number, the better, with any values above 1 implying a positive edge. Plotting the e-ratio across different durations allows you to check the edge offered by the signal and what timeframe works best for the signal parameters. You can also combine e-ratios for different parts of a system to see how they impact each other. Another component of a trading system could forex mae a trade filter, for example, trade with forex mae main trend:.
Only buy when the moving average at a higher timeframe is rising and below the price. Only sell when the moving average at a higher timeframe is declining and above the price Forex mae second e-ratio plotted is from a combined entry signal and trade filter. You can see the improvement a filter logic forex mae The e-ratio is one tool in the box of an automated trading system developer. It can quickly give you an overall feel for a component to include in the trading system.
The e-ratio was calculated using TradersStudio and Excel. The system tested was a Donchian Channel Breakout 17 days with 7 Futures markets. The MA used for filtering was days. I will follow-up with a post containing the code used to calculate it.
I just noticed in your blogroll the aggregate link to all you perfered blogs, excellent collection. Millward, Glad it helps. If you have any other blogs that you think might be of interest for the blogroll, please let me know.
You pretty well have the algo side of blogs covered, its difficult to find good ones under this genre, but will do. The concept forex mae to graph your normalized volatility-adjusted MFE maximum favorable excursion to […]. Hi Jez, Could you clarify one forex mae Hi Jez, I am using the free trial version of Trading Blox and I am trying to test the edge of different entry signals.
I am basically progressing from a random entry to dual MA, Donchian etc. Is there a predefined Blox that already calculates and plots the e-ratio or do i need write the code from scratch. Or if u have forex mae addressed e-ratio calculation in TB in a different article can u pls point me to it? And the forex mae of the e-ratio calc in TB from the discussion above are available for download, but I believe you will not have access to it with the free version of TB ie they are in the Blox marketplace, which I think is only accessible for paid customers: Hello sir, I have came across ur blog to find any afl for auto trading for the amibroker for stock markets of india.
I will highly appreciate if u can make 1 of the auto trading system forex mae which Forex mae can define my formula to trade. Hi Kushal — forex mae for forex mae comment. Unfortunately, I do not use AmiBroker any more so the possibility of publishing other afl code is forex mae remote. There is a large user base though with yahoo groups being very responsive and other collections of afl codes available fairly easily, so you might have more luck over there.
This would then be used to rank indicators rather than comparing the graphs? Agree its a blunt instrument, but perhaps it has a use in highlighting where to concentrate analysis, when faced with hundreds of indicators. The forex mae is your friend! Others call it the e-Ratio. It consists of evaluating the relationship between the advantage offered a position in the market […].
Notify me of followup comments via e-mail. Sy blog, Systematic Trading research and development, with a flavour of Trend Following. Past performance is not necessarily indicative of future results. Futures trading is complex and presents the risk of substantial losses; as such, it may not be suitable for all investors.
The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy.
The ideas expressed on this site are solely the opinions of the author. The author may or may not have a position in any financial instrument or strategy referenced above. Any action that you take as a result of information or analysis on this site is ultimately your sole responsibility. Sy blog — Forex mae tomated Tra ding Sy stem. Sy recommends CSI Data. The second e-ratio plotted is from a combined entry signal and trade filter.
Thank U, Regards, Kushal. Free Updates By Email: Were the Turtles just lucky? Enter your email address:
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