MAE and trade analysis

["Walter Lake" <wlake@xxxxxxxxx>]

Hi Frans and others who have written

MAE or Maximum Adverse Excursion ("Bottom Day") doesn't make a lot of sense
without looking at the chart of the trade.

For those that aren't familiar with MAE or where to find it in Metastock,
I'll run through the steps. Maybe some of the skilled "attachment" people
can post a chart to demonstrate, because I don't have the faintest idea how
to send an attachment.

Open a tradeable: stock, index, fund, etc.

Go to System Tester --> options --> Reporting --> check the box "display
Buy/Sell Arrows"

Run system test - e.g. a 2 Simple MA crossover with optimization - gives
lots of good and bad "results"

click reports
double click on most profitable "test"

System Report has 4 tabs on top
a) results
b) trades
c) equity (equity curve analysis is covered extensively in Sweeney's book
"Maximum Adverse Excursion" and Chande's book "Beyond Technical Analysis")
d) system (details the code used)

Click on the "trade" tab (lists all trades - includes MAE info)
Double click on any trade for a "Trade Detail Report"

Print out needed reports

Close all of the above except for the tradeable chart which should have
buy-sell arrows displayed.

Zoom in so that any one of the trades fills the chart
I normally print the chart of the trade

circle the buy at the closing price, i.e., $4.85, shown in the Trade Detail
Report"
if long and MAE is 0.40 = $0.40
go to scale and go down the scale to ($4.85 - 0.40) = $4.45
go across the grid to the bar that intersects with $4.45
notice that the MAE amount is the intraday low (if long) not the close

Repeat the procedure for MFE (Maximum Favourable Excursion) ("Peak Day")
this figure is not given in Metastock but can be easily found on the chart
MFE is the maximum intraday high of the trade

Notice also in your Trade Detail Report that the total "Days in Trade" and
"Bars in Trade" are given
This is confusing for some, because I believe that Metastock uses "Days in
Trade" to mean calendar days in trade whereas most writers use "Days in
Trade" to mean "trading days in trade" or "bars in trade".

It is easy to manually count the "bars in trade" for MAE and MFE.

You now have some basic details about the trade to start analysing and
comparing trades. How good did the trade get? How bad did the trade get? How
long did it take to go bad? etc.

Each trade chart becomes a "case" for me. If the system test produced 20
trades over 3 years then I have 20 "cases" to analyse. I have been doing the
case or trade analysis like this for a number of years. I'm in the process
of switching all of this analysis over to Excel so that I can "automate" the
analysis of 20 or 200 cases/trades at a time.

Best wishes

Walter Lake