Signal Analysis Page: Trading Risk
The Modify Field Dialog allows you to analyze and modify the properties of a field. The Signal Analysis page allows you to analyze statistics associated with an entry/exit signal.
& For help with entry/exit signals, see Creating and Analyzing Entry/Exit Signals.
Trading Risk Sub-Page
This sub-page displays several measures that can be useful for determining the risk associated with the trades made when analyzing a particular entry/exit signal. Some of the information can be analyzed as either percentage gains or dollar gains. It can also be restricted to specifically long trades or short trades within the simulation when both types of trades are being made.
Ä Note: This sub-page does not take into account the strength of the prediction for predicted signals. That information can be assessed on the Training Analysis page.
What Can I Determine From This Page?
The following types of risk can be assessed using these strategies. For help with the individual values, see below for the descriptions of each section.
· Trade Effectiveness
Look at the Profit Factor. This value takes into account the amount of money that was lost in the process of making the reported gains.
Also, look at the Exit Efficiency. This value is a measure of whether trades may have been held too long relative to the maximum amount of profit to be made.
· Worst Case Scenarios
Look at the Maximum Consecutive Losers. This will give you an idea of how many losing trades you may have to face before getting a winner.
This section displays an analysis of the equity on a trade-by-trade basis. The values that are used in these calculations are available on the Equity By Trade sub-page.
p Percent Winners
This value is the percentage of the overall trades for the given type of trade.
p Profit Factor
This value is the profit generated by profitable trades divided by the losses generated by losing trades. A value of 2 would indicate that twice as much money was made from winning trades than was lost from losing trades. Higher values indicate less risk.
Ä Note: This value is not defined if no losing trades were made.
p Avg Win / Avg Loss
This value is the average profit generated by profitable trades divided by the average losses generated by the losing trades. This differs from the Profit Factor in that it does not take into account the number of winning or losing trades. Instead, it compares the size of the wins to losses. Higher values indicate less risk.
Ä Note: This value is not defined if no losing trades were made.
Entry / Exit Analysis
This section displays an analysis of statistics associated with the entry and exit of trades.
p Exit Efficiency
This value is the cumulative gain for all trades divided by the cumulative maximum gain for all trades.
This is useful for determining if trades are being held past their maximum value. Values close to 100% indicate that the trades are typically being exited when the maximum profit is available. Lower values indicate that higher profits may be possible if the strategy for generating exit signals were more aggressive.
Ä Note: This value does not take into account the profits missed from exiting a trade too early. For example, keeping every trade to a length of one bar would produce an exit efficiency of 100%, but this would typically not be the most profitable system.
p Trades Stopped
This value is the percentage of trades that were exited due to a stop ordering being executed. Values close to zero are preferable, since trades that are exited using a stop typically do not get a favorable exit price.
p Limits Not Reached
This value is the percentage of attempted trade entries that were not executed due to the limit price not being reached. Values close to zero are preferable, since trades that are not executed typically miss potential profits.
Maximum Draw Down
This section reports the low equity versus various points in the equity curve. This is useful for determining how prone the signal was to losses. It also is useful for determining the margin requirements for accounts that trade on margin.
It is important to note that these values typically occur in the middle of the trade, not necessarily on the exit.
p from Trade Entry
This value indicates the lowest amount of equity within a single trade relative to the amount that was invested in that trade.
Ä Note: This corresponds to the Max. Loss column on the Analysis by Trade page.
p from Trade High
This value indicates the lowest amount of equity within a single trade relative to the previous high made during that trade.
Ä Note: This corresponds to the Max. Drop column on the Analysis by Trade page.
This section reports the maximum number of consecutive winning and losing trades. This does not take into account the relative profitability of those trades, only whether those trades generated any profit.
p Max. Consecutive Winners
This value indicates the maximum number of profitable trades that occurred in a row for the given type of trade. This is useful for determining whether this signal may perform better during certain market conditions.
For example, a high number of maximum consecutive winners may indicate that there were certain periods of time when this signal was most effective.
p Max. Consecutive Losers
This value indicates the maximum number of unprofitable trades that occurred in a row for the given type of trade. This is useful for determining whether this signal may perform worse during certain market conditions.
For example, a high number of maximum consecutive losers may indicate that there were certain periods of time when this signal was not effective.
Expectancy Ratings
This section reports on trade expectancy. Expectancy was introduced by Van K. Tharp in the book "Trade Your Way To Financial Freedom". It is defined as "the expected profit per dollar risked" or the "mathematical expectation of profit". Like many other indicators, it has gone through various revisions as people have used it over time.
p Trade Expectancy
This value indicates the amount expected to be returned by each trade. It equals the percent wins times the average win, minus the percent losses times the average loss.
p Risk-Adjusted Value
This value takes the risk associated with volatile trading into account by dividing the trade expectancy by the average loss.
p Annualized Score
This value multiplies the risk-adjusted value by the annual trades to determine an annualized expectation of profit with risk taken into account.
How Did I Get Here?
This is a sub-page of the Modify Field Dialog: Signal Analysis page.