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John and Harvey,
Thank you both so much for your very informative contribution on the
MAE-subject.
Maximum Adverse Excursion,.....sexy name <G>
Best regards,
Frans
At 08:13 8-09-98 -0800, you wrote:
>Frans,
>
>You've got it correct as far as an individual trade. For a system, you
>aggregate all the MAE's of the individual trades in a graph (or table) that
>shows the MAE's for winning trades and the MAE's for losing trades. If the
>trading rule can discern between winners and losers, you should see
>different distributions. Typically, the winning trades have an MAE beyond
>which they usually won't go. In other words, winning trades only go wrong
>just so far.
>
>This was first published in the October 1985 TASAC but that's unavailable
>now unless you buy the CD-ROM for all the back issues (about $400 !!). Or
>you can buy the book (yep! I wrote it.).
>
>I'm developing a web site (http://seagym.com/mae) to explain all that and
>I'm enthusiastic about answering questions so feel free to ask.
>
>John Sweeney
>
>>Hi Walter,
>>
>>Gee you really force me into studying this MAE-thing <G>
>>
>>Do you or anybody else know if there is anything on the web by John Sweeny
>>regarding this subject ? Or did he write about it in TASAC ?
>>
>>I checked out Technical Analysis fm A to Z by Steven Achelis. Nothing there.
>>
>>The MS6.5 handbook pg. 322 says it is the worst intraday price move against
>>a position, measured from the entry price.
>>
>>I interpret this as the maximum open drawdown of the specific trade your
>>looking at.
>>
>>And than the system MAE would be the max. open drawdown over all the trades
>>done in that systemtest.(?)
>>
>>Perhaps I simply don't get the feel for what he means.
>>
>>Regards,
>>
>>Frans
>>
>>
>>
>>
>>At 15:58 7-09-98 -0400, you wrote:
>>>Hi Frans
>>>
>>>I put this on the bulletin board because of possible confusion others may
>>>have about MAE (Maximum Adverse Excursion).
>>>
>>>If you do a system test of 2 MA crossovers on a tradeable, you may have 120
>>>test reports. Each test report, i.e., 5 and 20 SMA cross will produce a
>>>system MAE, because the MA's will cross and get you out at that MAE level.
>>>
>>>If you pick one system report and go to trades you may see 10 to 100 trades.
>>>Each trade will have a MAE, none will exceed the system MAE.
>>>
>>>I do not use the system MAE to calculate "proven correct" for the
>>>tradeable. Instead I look at the MAE for each trade of the system (i.e., 5 &
>>>20 SMA cross). These are arranged like a distribution under a bell curve.
>>>What you are looking for is a "fat" tail. The distribution is put into
>>>"groups" or "bins". See Sweeney for a complete explanation.
>>>
>>>The same thing is done with the MFE (Maximum Favourable Excursion). This is
>>>superinposed over the MAE. You are looking for the most number of MFE in the
>>>smallest size of MAE.
>>>
>>>This is the basis I use for the distance part of the "proven correct"
>>>calculation.
>>>
>>>When I used the expression "that what goes, goes", what I meant was that
>>>some trades have a MAE of "0". They just take off and never look back.
>>>
>>>... Will write later.
>>>
>>>Walter
>>>
>>>
>>>
>>>
>>>
>
>
>John Sweeney, Tech. Editor Technical Analysis of Stocks & Commodities
>Technical Analysis, Inc. The Traders' Magazine
>4757 California Ave. S.W. Phone: 206 938-0570 Fax: 206 938-1307
>Seattle, WA 98116-4499 USA Web: http://www.traders.com/
>____________________________________________________________________
>Contents may not reflect official opinion of Technical Analysis, Inc.
>
>
>
>
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