Peak/Trough - to Exit

[Purple Brain]

I understand draw down is the amount trough to peak on an equity curve and is even used in defining downside exposure on an individual trade regardless of eventual profit or loss of the trade.

But is there an associated term for the amount you could have taken at maximum, but don't. If you're trading an up move and it peaks and you wait for whatever criteria to signal an exit. You could have got out at 1.2500 but you eventually exit for 1.2475, effectively leaving 25 points 'on the table'. Regardless of the P&L for that trade, is there any recognised term to describe those 25 points, on paper, that were lost?

 

[Shakone]

Maximum Favourable Excursion?

 

[brewski1984]

Do you include targets and stops hit when working out MAE/MFE? As in, stopped out for -50 would have an MAE of -50 in total calculations?

 

[Purple Brain]

All this time I've been using max intradtrade drawdown instead of MAE and you were all to polite to correct me (or more likely, didn't see the posts).

This site is a genuinely excellent resource. Thanks guys.

 

[NVP]

I understand draw down is the amount trough to peak on an equity curve and is even used in defining downside exposure on an individual trade regardless of eventual profit or loss of the trade.

But is there an associated term for the amount you could have taken at maximum, but don't. If you're trading an up move and it peaks and you wait for whatever criteria to signal an exit. You could have got out at 1.2500 but you eventually exit for 1.2475, effectively leaving 25 points 'on the table'. Regardless of the P&L for that trade, is there any recognised term to describe those 25 points, on paper, that were lost?

I call it the Exit Premium.......

and its a very good point you make ........so few traders seem to focus on Exit strategies anyway and even fewer try to define how to improve their exit strategy and to minimise their "Exit Premium" ...

Everyone here spends 99% of their efforts on improving entries ........but theres plenty of low fruit on minimising the exit premium ..........even 1 pip per successful trade would soon mount up :smart:

N

 

[TheRealThing]

Exits are definitely the "Holy Grail" of profit potential.

You never have to enter a trade unless you have a good reason. But once in, you absolutely have to exit at some point. That makes the exit (and its criteria) more crucial to profits than the entry.

TRT

 

[the hare]

Everyone here spends 99% of their efforts on improving entries ........

N

Not quite true, but I suspect most here at the zoo are focussing on entries.

 

[NVP]

Not quite true, but I suspect most here at the zoo are focussing on entries.

yep........entry, entry, entry,...........

we should have a competition here at T2W where traders have to take the same compulsory entry points on say 50 consecutive trades and the winner is the one who extracts the most profit from the trades over a set time period

profit being determined as including carried trades though....none of that under the carpet bull****:whistling

N :smart:

 

[NVP]

In fact I was only discussing this the other day with Jedster .......

I always think of trading as a business and you have an Entry Department and an Exit department

The Entry departments job is to deliver the Highest % of non losing trades against a set defined parameter - say for example they are measured against each trade that hits a 1:1 ratio target (defined Stop loss sets the pippage)....they cannot Exit earlier .....its just win or lose and the pips are recorded

The Exit departments job is to be rewarded on the profitability delivered on all trades entered - ignoring the 1:1 ratio rule set by the entry team........they can do what they want....including Exiting before the stop loss is hit..........or even override the stop loss if needed

Clearly in real world trading the 2 are interlinked...........but looking at it this way can generate new ideas and challenge any preconceptions ........which is important in the learning process

seperate departments ...seperate departments ..........
N

 

[0007]

This is a good thread with interesting discussion on exits -- definitely a neglected area judging by the number of postings concerning "systems" and "entries" on trading sites in general.

I started recording MAE and MFE sometime ago for all trades and it has proved to be very useful in improving performance: MAE will tell you how good your stop is and MFE similarly with your exit. Once you get these metrics down on the spreadsheet you may be able to see a pattern emerging and adjust your trading accordingly.

Once the trade has been closed the tendency is to move on to the next one and forget the previous success or not! I have found it useful to continue monitoring the trade and see what if any unrealised potential was to be had. In my case, the spreadsheet showed a tendency of exiting too early in certain situations and I was able to just my trading accordingly.

It's easy to take the recording of metrics and their analysis too far and if you're making loads of dosh then perhaps it's not worth making the effort. But I found that it's a good route to making loads of dosh.

 

[malaguti]

we should have a competition here at T2W where traders have to take the same compulsory entry points on say 50 consecutive trades and the winner is the one who extracts the most profit from the trades over a set time period

profit being determined as including carried trades though....none of that under the carpet bull****:whistling

N :smart:

Thats a great idea, 50 may be too many, but why not have a competition like that?
start a thread and see who joins, create a demo account somewhere and play it out. then we all have to demonstrate the exact trade, having all started at the same account balance.

 

[TheRealThing]

That would be the best type of competition possible.

I would prefer 500 trades for a statistically decent sample. Exits are easily the greatest component of any trade. The reason there are so many (more than 90% of the total participants) who are net losers in this business is because of losses that are allowed to get out-sized.

A simple rule to handle your losses is this: (from my pit days):
"If you have any doubt, get out."

T R T

yep........entry, entry, entry,...........

we should have a competition here at T2W where traders have to take the same compulsory entry points on say 50 consecutive trades and the winner is the one who extracts the most profit from the trades over a set time period

profit being determined as including carried trades though....none of that under the carpet bull****:whistling

N :smart: