28 Mar 2019
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This code snippet is designed to calculate and graph the Maximum Adverse Excursion (MAE) and Maximum Favorable Excursion (MFE) during the backtesting of a trading strategy. These metrics are crucial for assessing the potential risk and reward of a strategy while it is in the market.
inside a strategy, it shows mae / mfe
if longonmarket then
lowestprice=min(tradeprice(1),low)
mae=lowestprice-tradeprice(1)
if mae>mae[1] then
mae=mae[1]
endif
highestprice=max(tradeprice(1),high)
mfe=highestprice-tradeprice(1)
if mfemae[1] then
mae=mae[1]
endif
lowestprice=min(tradeprice(1),low)
mfe=tradeprice(1)-lowestprice
if mfe Explanation of the Code:
- MAE and MFE Calculation: The code calculates MAE and MFE for both long and short positions in the market. MAE measures the largest loss from the entry point, while MFE measures the largest profit from the entry point during the trade's lifetime.
- Conditional Checks: It uses conditional statements to check whether the strategy is in a long or short position and updates the MAE and MFE values based on the highest and lowest prices since entering the trade.
- Resetting Values: When the strategy is not in the market or switches between long and short positions, it resets the MAE and MFE values to zero.
- Graphing Results: Finally, the code graphs the rounded values of MFE and MAE, coloring them blue and red respectively, to visually represent the excursions during the strategy's execution.
This snippet is a practical tool for traders and analysts to visually assess the risk and reward characteristics of their trading strategies during backtesting.
Related Post
Check out this related content for more information:
https://www.prorealcode.com/topic/mae-mfe-code-indicator/#post-129348
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