MFE is an extremely powerful variable that nt produces for the underlying trades for a strategy. However, I am becoming extremely skeptical behind the accuracy of this variable. I have a strategy where my entry logic is same exact and my exits are based on time.
during strategy run 1 backtest: I exit after 1 bars
during strategy run 2 backtest: I exit after 2 bars
there are many scenarios where during both of my strategies runs, my entries are made on the same exact time and price. for example:
strategy 1 run: entry time = 1am and price = .73
strategy 2 run: entry time = 1am and price = .73
since my exit is time based:
strategy 1 run: exit at 1:01 am at price of X
strategy 2 run: exit at 1:02 am at price of Y
*note my strategy bars are actually 180 minute bars but in the example above i am using 1 minute for simplicity.
under the above entries, I am seeing that my MFE for strategy 1 (lower time) for that trade is actually higher than strategy 2 run (higher time). That makes no sense, because strategy 2 run exits after 2 bars, which would be cumulative of previous bars. Therefore, my strategy 2 run for entries that were made at the same price and same time in compared to strategy 1 run should ALWAYS have a greater MFE.
see attached excel file screenshot explaining the scenario. i am suspecting the same is true about mae and other variables as well. why is this happening? there are important variables and the software should not be getting these incorrectly. the formula behind mfe is fairly simple.
The extent to which this variable is incorrect is mind-boggling; out of 3057 trades that occured at the same exact time and at the same exact price; the mfe is incorrect 92% of the time. incorrect= 1 bar mfe > 2 bar mfe. How am I suppose to build strategies when I can't even trust the variable?
what am I missing here?
thanks
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