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Andreas,
Calculating system entry and exit point efficiency is quite interesting and
not as straightforward as it may first seem. Calculations based on just the
trade period can be very misleading.
For example if a sytem exits a long trade after 5 days with a 5% gain but
the stock then continues to
rise another 8% over the next 5 days was the exit efficient?
IMO to calculate the true efficiency of an exit it is necessary to take
account of what actually
happened in the market after the exit. Basically for long trades we want to
know how close the system exit was to finding the highest peak in the nn
days following the trade entry and for short trades similarly the lowest
trough. Deciding how many days past the system exit to examine for this
purpose is also an interesting question. Note although I have referred to
"days" throughout any time period is applicable.
John
Andreas wrote:>
> Just to add a bit of information:
>
> At www.rinasystems.com under Articles you'll can find a .PDF-file covering
> the measurement of system efficiency, i.e. how to calculate and interpret
> their so called entry/ exit/ and total efficiency. These numbers provide
> additional insight into how well your signals are.
>
> The calculations for Long Positions are as follows, where:
> Entry and Exit Price are speaking for themselves,
> Lowest and Highest Price are the relative low/high values during the trade
>
> Total Efficiency = (Exit Price - Entry Price) / (Highest Price - Lowest
Price)
> Entry Efficiency = (Highest Price - Entry Price) / (Highest Price - Lowest
Price)
> Exit Efficiency = (Exit Price - Lowest Price) / (Highest Price - Lowest
Price)
>
> Thus you'll see how well your signals worked.
>
>
> Andreas
>
> ---
> Andreas Grau aka agrau@xxxxxxxxxxxxxxxxxxxx
>
> I know you believe you understand what you think I said,
> but I am not sure you realize that what you read is not
> what I meant. -- Found in an English pub
> John wrote:
>
> > In case anyone was wondering why I would want an exit like this it is
purely
> > for testing out the relative effectiveness of various different entry
> > strategies (by minimising the effect of the exit strategy). In a real
> > system the exit strategy would be just as important, if not more
important,
> > than the entry strategy.
>
>
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