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Have you ever wondered:
In this guide, we will review how TraderSync’s simple-to-digest reports help you quickly answer these questions and more.
Before we attempt to answer these questions, it is important to understand the following metrics provided by TraderSync, as we will use them to answer the questions above:
Price MAE represents the maximum adverse price movement against a trade position before the trade is closed. It measures the worst price change.
Let’s assume the following:
The example illustrates a short trade. Between 17:50:00 and 18:24:00, the worst price was $13.63, as this is the highest price the underlying reached during the trade. For a short trade, a higher price means a greater loss.
Day traders use Price MAE to assess potential risk and set stop-loss orders. It helps traders understand the maximum unfavorable price movement they might encounter during a trade.
Price MFE is the maximum favorable price movement in favor of a trade position before the trade is closed. It measures the peak profit potential of a trade.
Let’s assume the following:
In this short trade example, between 17:50:00 and 18:24:00, the best price was $12.70. For a short trade, a lower price means a higher profit.
Day traders use Price MFE to evaluate the profit potential of a trade. It aids in setting profit targets and understanding how much price movement was in their favor during the trade.
Position MFE is the sum of the maximum favorable return during the trade based on the Price MFE. It tells you the peak profit reached during the trade and should equal the highest point of your running PnL.
Let’s assume the following:
If you had exited at $12.70 instead of $13.13, your profit would have been $20 (100 shares x ($12.70 – $12.90)) instead of $23 (100 shares x ($13.13 – $12.90)).
This metric helps day traders assess their ability to capture favorable price movements. It is particularly useful for evaluating the overall MFE performance of all trades for a particular trading strategy, helping to identify opportunities to increase profits by adjusting exit strategies.
Position MAE is the sum of the maximum adverse return during the trade based on the Price MAE. It tells you the worst loss reached during the trade and should equal the lowest point of your running PnL.
Let’s assume the following:
If you had exited at $13.63, your loss would have been $73 (100 shares x ($13.63 – $12.90)) instead of $23 (100 shares x ($13.13 – $12.90)).
Day traders use Position MAE to evaluate the overall risk exposure of a particular trade. It helps understand the overall risk of your strategy and determine if adjustments are needed.
Represents the best possible overall return you could have made on the trade by moving the last exit execution to the optimal point between the previous same-side execution and the end of the day.
Let’s assume the following:
In this long trade, if the best possible exit before the end of the day was at 10:20:00 when the price was $11.66, the best possible return would have been $679 (100 shares x ($11.66 – $4.87)) instead of just $23.
Helps you determine if there exists an opportunity to hold your positions longer for a better overall return.
We remove the last execution and move it forward, analyzing each minute candle until the end of the day. For swing trades, we analyze daily candles.
Let’s assume the following:
We will move forward the last execution to analyze each candle. This will generate an output similar to:
This analysis is particularly helpful when looking at aggregated results among your trades. You can answer questions like:
“If I hold all my positions for my strategy X for 5 more minutes, would that create a significant impact on my trading performance?”
A few things to consider when evaluating rolling exits:
Circling back to the value of these exit analysis reports, we are looking to answer the questions we initially outlined:
You can use the Position MAE to understand the worst PnL during the trade. This helps:
You can use the Position MFE to understand the peak PnL during the trade. This helps:
Using the Best Exit metric, you can know what would have been the best possible exit for your specific trade. This metric gives you an idea of how efficient your strategy is, though consistently capturing the best exit is challenging.
The Rolling Exits analysis can help determine if there is an opportunity to hold your positions longer for a specific timeframe to maximize your return.
We hope these tools help you evaluate the exit rules of your trading strategy to optimize the potential R Multiple return.
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