Comments on: e-ratio: How to measure your trading edge in 4 easy steps

By: Jez Liberty

Jez Liberty — Mon, 21 Nov 2011 15:35:51 +0000

Agree on both counts, the blunt instrument can be good to cut through a lot of indicators and using the MAE/MFE as a percentage figure for each trade would make it easier to calculate – albeit the results will not be identical with both methods.

By: Matt

Matt — Mon, 21 Nov 2011 12:56:08 +0000

Re: aggregation. Agree its a blunt instrument, but perhaps it has a use in highlighting where to concentrate analysis, when faced with hundreds of indicators.

Re: percentage – not the final ratio, I was thinking more about the use of the ATR to normalise across markets. If the MAE/MFE are a percentage figure, then there is no need to use the ATR to bring them down to a common unit. Unless I’ve missed something :)

By: Jez Liberty

Jez Liberty — Sun, 20 Nov 2011 09:02:06 +0000

Matt,
This is definitely a good idea – you would “lose” the info about which timeframes are performing best (which was one of the idea behind this methodology), but you could aggregate one figure for many indicators indeed.
Re: your percentage question, the e-ratio (MFE/MAE) is already a percentage-type value, ie an e-ratio of 1.4 means that the MFE is on average higher than the MAE by 40% so if I undertand correctly, this is just a matter of writing conventions?

By: Matt

Matt — Thu, 17 Nov 2011 13:22:16 +0000

Hi,

Excellent post … wondered if you’d had any thoughts on aggregating MFE/MAE across all “n” results to come up with a single ratio for the indicator type? This would then be used to rank indicators rather than comparing the graphs?

Do you think the MFE/MAE could also be normalised by expressing them as a percentage?

Matt

By: Jez Liberty

Jez Liberty — Sun, 21 Aug 2011 13:13:48 +0000

Hi Kushal – thanks for the comment. Unfortunately, I do not use AmiBroker any more so the possibility of publishing other afl code is very remote.
There is a large user base though with yahoo groups being very responsive and other collections of afl codes available fairly easily, so you might have more luck over there

By: Kushal

Kushal — Sun, 21 Aug 2011 12:13:11 +0000

Hello sir,
I have came across ur blog to find any afl for auto trading for the amibroker for stock markets of india.
I will highly appreciate if u can make 1 of the auto trading system in which I can define my formula to trade.
Thank U,

Regards,
Kushal..

By: Jez Liberty

Jez Liberty — Mon, 25 Oct 2010 11:32:20 +0000

Hi LuckyF00L, I haven't redevelopped the e-ratio in TB... There is some discussion about the e-ratio on their forum: link1 And the implementations of the e-ratio calc (in TB) from the discussion above are available for download, but I believe you will not have access to it with the free version of TB (ie they are in the Blox marketplace, which I think is only accessible for paid customers): link2 link3

By: LuckyF00L

LuckyF00L — Sat, 23 Oct 2010 16:37:44 +0000

Hi Jez,
I am using the free trial version of Trading Blox and I am trying to test the edge of different entry signals. I am basically progressing from a random entry to dual MA, Donchian etc. Is there a predefined Blox that already calculates and plots the e-ratio or do i need write the code from scratch. Or if u have already addressed e-ratio calculation in TB in a different article can u pls point me to it? Thanks

By: Jez

Jez — Thu, 12 Aug 2010 07:18:16 +0000

montechristo,
Conceptually it is easier to grasp the idea that the e-ratio compares the average MAE to the average MFE, hence that step in the calculation – however, I’ll give you that mathematically this is completely equivalent to comparing (and dividing) Total MAE with Total MFE (and step 3 can be considered “optional”

By: montechristo

montechristo — Thu, 12 Aug 2010 06:48:27 +0000

Hi Jez,
Could you clarify one point:
You say to divide MAE and MFE by the number of trades and then divide average MAE by average MFE. But (MFE/n)/(MAE/n) is equal to MFE/MAE. So E-ratio is not linked to the number of trades and you don’t have to caculate the average of MFE and MAE or I missed something ;-)