Hi, I have a profitable Algos that has a relevant difference between max dd and MAE
Max drawdown -2373$ 9% (MAE -12567$ 48%)

My understanding is that the trade management is not good. I'd like to investigate and improve it, but I do not know how to move forward.

Any Idea? Thank you

I'm similarly new to algo trading of forex so I can't say I can help that much but I think this depends a lot on what's causing that loss.

If it's individual trades having huge losses, I'd say tighten your stop loss. If you're using a trend following algo, http://www.financial-hacker.com/the-market-meanness-index/ might be useful.

Find out first if the problem comes from only a few extreme trades, or from many trades. Problems in trade management can be examined by plotting price profiles of the trades.

@jcl, thank you, what do you mean by plotting the price profile I will copy the algo, its an evolution of your code, so its not a secret... I would like your help in order to improve my analysis capabilities.

@Veratyr, thank you for your post. The Algo was taken from the blog you have referred wuth minor changes.


function TFM()
{
/* Annual return 245%
Profit factor 4.23 (PRR 3.61)
Sharpe ratio 0.88
Kelly criterion 0.31
R2 coefficient 0.808
Ulcer index 10.0%
Prediction error 36%
*/
algo("TFM");
var mmiPeriod = optimize(100, 25, 600, 25 );
var lpPeriod = optimize( 90, 30, 150, 6 );
Stop = optimize(4, 2, 8, 0.5) * ATR(100);

var stopPip = Stop / PIP;
var minPip = 10;
Trail = stopPip * minPip;
TrailSlope = (minPip * 100) / stopPip;
TrailLock = optimize (0, 0, 75, 5);

vars Price = series(price());
vars Trend = series(LowPass(Price, lpPeriod));
vars MMI_Raw = series(MMI(Price, mmiPeriod));
vars MMI_Smooth = series(LowPass(MMI_Raw, mmiPeriod));

if(Train && ParCycle <= 2) {
Stop = 4 * ATR(100);
TakeProfit = 8 * ATR(100);
Trail = 0;
TrailSlope = 100;
TrailLock = 0;
}

if(falling(MMI_Smooth)) {
if(valley(Trend)) {
enterLong();
}
else if(peak(Trend)) {
enterShort();
}
}
}

Ok,
the above script has the following result:

Max draw-down -1670$ 4% (MAE -13289$ 35%)

The the MAE distribution is attached it seems that few trades generate the issue. What do you recommend?

Cut off stop loss at a maximum of -500, or even -400 perhaps.

To avoid the trades with the highest losses stop any trade if TradeMAE > 210. Above there is only little chance to get a profitable trade with relatively little profit but a high chance to get a sometimes significant loss.

Thank you, I'll give it a try and keep you posted. Ciao

Defined the following TMF, but it does not work ie it does not block the trade at the required level. I have used just onw asseet for testing. Still trying...

int maxMAE(var maxPIP){
if (abs(TradeMAE) > maxPIP*PIP) return (1);
else return(0);
}

...
enterLong(maxMAE, 250);
enterShort(maxMAE, 250);
...

Did you make any progress here? I have the same problem using the routine

in a TMF expecting a plotMAEGraph with many trades ending around 90 but many trades go far beyond this border.