The concept of Maximum Adverse Excursion MAE

In order to find proper stop points for your system you should take a deeper look into the distribution of trades and examine each trade individually. When you do so, you will discover that there are similarities between them, but that every trade also has its own set of characteristics. These characteristics can be examined by using the Maximum Adverse Excursion MAE technique developed by John Sweeney less than ten years ago 9 . MAE is defined as the most intraday price movement against your...

LUXOR tested on different bar compressions

It is fascinating to check how a trading strategy changes on different timescales regarding its important system figures and equity lines. Let's do such a timescale analysis for the LUXOR trading system. As you remember LUXOR was developed on 30 minute data of the British pound US dollar FOREX market. Let's have a look at the equity lines on different timescales Figure 4.2 . You see from these curves that our developed system logic gains steady profits on all the different timescales, starting...

Bollinger Band system with logic and code

Bollinger Band Breakout Stop Loss

We will stay with the pound dollar FOREX market from 2002-2008 Datafeed TradeStation 8 to test the system. We take a Bollinger Band system Figure 5.4 and optimise all its main six input parameters for the entry and exit points on daily data within the training period between 30 04 2002 and 1 3 2006 Figure 5.3 . Please note that this Bollinger Band system allows a different optimisation of its input parameters concerning the long and the short side. For the upper and the lower Bollinger Band the...

Interpolating data points with polynomial functions

You have just seen how a trading system's predictive power for the future changes with the number of rules which are involved in the strategy. In our system these rules have been the fast and slow moving average, the very effective intraday time filter and finally the three exits we added. You have seen that a simpler trading system has more predictive power than a more optimised one. We can state that this result was not just gained by accident but it is well founded on statistical rules. We...

Dynamic portfolio composition the walk forward analysis activator

It was developed by Fabrizio Bocca and Cristiano Raco, two brilliant Italian systematic traders, and has not been disclosed so far. Let's look at an example on an intraday trading system which is put under periodic optimisation every 3-months inside a process of walk forward analysis. If during the 3 month periodic re-optimisation the system has a walk forward efficiency ratio of more than 50 then it is traded in real time and conversely if the walk forward...