The first comprehensive guide on maximum adverse excursion –a powerful new tool for dramatically lessening trading risks “Trading successfully, like everything else, is built upon solidpreparation. It is the well-prepared individual who will be able tocope in today’s competitive market. John Sweeney’s Maximum AdverseExcursion will provide you with the steps to perform the analyticalreview of your trading system that you should undertake before youever risk your capital.” — Thomas Hartle, Editor TechnicalAnalysis of Stocks & Commodities magazine “Maximum Adverse Excursion deals with a much overlooked subject:how to minimize losses. If every trader took John Sweeney’s adviceand learned how to minimize losses before trying to make profits,they would be financially ahead.” — Martin J. Pring,President The International Institute for Economic Research “John Sweeney has done it again. As with Campaign Trading, hetakes a complex set of ideas and explains them in a simple,easy-to-understand manner, in a form that traders can use to helpthem make informed and profitable buy-sell decisions.” –Clifford Sherry, PhD, author The Mathematics of TechnicalAnalysis Most successful traders have a “sixth sense” that alerts them toloss points and amounts. But what happens when intuition fails? When the potential loss incurred on a trade is significant, youneed more than guesswork. But is it possible to estimate the losspoint accurately–quantitatively? With maximum adverseexcursion (MAE), the answer is a resounding “YES”. This innovativemethod of risk management enables traders to steer clear ofpotentially devastating results by pinpointing loss points beforeimplementing trading decisions. Now, in the first book to providean in-depth examination of this vital trading tool, John Sweeney,MAE developer and Technical Editor of the highly regarded TechnicalAnalysis of Stocks & Commodities magazine, takes you step bystep through its various intricacies. In this comprehensive and accessible reference, Sweeney showshow the key to successful MAE implementation lies in determiningwhether there is any consistency in market behavior. By measuringand charting price excursion from a set point of entry, you canestablish–quickly and easily–whether prices showconsistent behavior over a finite time frame. If, in fact, someregularity, some pattern in price changes is revealed, you can thenexploit it while in the trade. The bottom line is a more reliablesystem for discerning whether your trade is going in your directionor not, and–in either case–what likely events are next.By replacing guesswork with statistical descriptions, you canobjectively determine when to cut off a loser, or put in aprotective stop . . . or take profits. Maximum Adverse Excursion can give you “the elusive edge thattraders seek . . . a line all your own, from which profits can flowwith minimized, quantifiable risk.” This comprehensive, accessiblereference gives you the tools you need to employ MAE successfully,including detailed information on: * Defining and calculating adverse, minimum, and maximumfavorable excursion (MinFE and MaxFE) * Displaying MAE–aggregation, frequency diagrams, stopsize * Determining specific capital requirements–capitalconservation, defining drawdowns * Profit definition by stop level–profit tradeoffs, profitcurves, interpretation * Impact of volatility changes–tweaks, changing stops byrange or volatility * Trading management–portfolio impacts, day-to-daymanagement, elaborations Complete with sample calculations, practical examples, and EXCELprograms for creating your own charts, this is the definitive guideto using MAE effectively–and profitably.
Book Details:
- Author: John Sweeney
- ISBN: 9780470340943
- Year Published: 1996
- Pages: 176
- BISAC: BUS036000, BUSINESS & ECONOMICS/Investments & Securities / General
About the Book and Topic:
The first comprehensive guide on maximum adverse excursion –a powerful new tool for dramatically lessening trading risks “Trading successfully, like everything else, is built upon solidpreparation. It is the well-prepared individual who will be able tocope in today’s competitive market. John Sweeney’s Maximum AdverseExcursion will provide you with the steps to perform the analyticalreview of your trading system that you should undertake before youever risk your capital.” — Thomas Hartle, Editor TechnicalAnalysis of Stocks & Commodities magazine “Maximum Adverse Excursion deals with a much overlooked subject:how to minimize losses. If every trader took John Sweeney’s adviceand learned how to minimize losses before trying to make profits,they would be financially ahead.” — Martin J. Pring,President The International Institute for Economic Research “John Sweeney has done it again. As with Campaign Trading, hetakes a complex set of ideas and explains them in a simple,easy-to-understand manner, in a form that traders can use to helpthem make informed and profitable buy-sell decisions.” –Clifford Sherry, PhD, author The Mathematics of TechnicalAnalysis Most successful traders have a “sixth sense” that alerts them toloss points and amounts. But what happens when intuition fails? When the potential loss incurred on a trade is significant, youneed more than guesswork. But is it possible to estimate the losspoint accurately–quantitatively? With maximum adverseexcursion (MAE), the answer is a resounding “YES”. This innovativemethod of risk management enables traders to steer clear ofpotentially devastating results by pinpointing loss points beforeimplementing trading decisions. Now, in the first book to providean in-depth examination of this vital trading tool, John Sweeney,MAE developer and Technical Editor of the highly regarded TechnicalAnalysis of Stocks & Commodities magazine, takes you step bystep through its various intricacies. In this comprehensive and accessible reference, Sweeney showshow the key to successful MAE implementation lies in determiningwhether there is any consistency in market behavior. By measuringand charting price excursion from a set point of entry, you canestablish–quickly and easily–whether prices showconsistent behavior over a finite time frame. If, in fact, someregularity, some pattern in price changes is revealed, you can thenexploit it while in the trade. The bottom line is a more reliablesystem for discerning whether your trade is going in your directionor not, and–in either case–what likely events are next.By replacing guesswork with statistical descriptions, you canobjectively determine when to cut off a loser, or put in aprotective stop . . . or take profits. Maximum Adverse Excursion can give you “the elusive edge thattraders seek . . . a line all your own, from which profits can flowwith minimized, quantifiable risk.” This comprehensive, accessiblereference gives you the tools you need to employ MAE successfully,including detailed information on: * Defining and calculating adverse, minimum, and maximumfavorable excursion (MinFE and MaxFE) * Displaying MAE–aggregation, frequency diagrams, stopsize * Determining specific capital requirements–capitalconservation, defining drawdowns * Profit definition by stop level–profit tradeoffs, profitcurves, interpretation * Impact of volatility changes–tweaks, changing stops byrange or volatility * Trading management–portfolio impacts, day-to-daymanagement, elaborations Complete with sample calculations, practical examples, and EXCELprograms for creating your own charts, this is the definitive guideto using MAE effectively–and profitably.
The only book that examines and defines risk by examining and measuring market behavior a vital element for traders in determining their capital requirements.
Provides a clear, quantitative method for determining when and how much could potentially be lost on a trade. Supplies traders with a tool to measure the capital requirements of each trade so there are no surprises later should the trade go bad an important risk management tool. Thoroughly explains a tool that has not been covered elsewhere except in brief magazine articles by the person who developed the method. Gives readers the tools and computer programs to create their own charts. Written by a top writer and editor for the highly regarded Technical Analysis of Stocks & Commodities magazine.
About the Author
JOHN SWEENEY is former Vice President, Diversification, SeafirstBanking Corporation, a Northwest bank holding company. A traderhimself, he is the Technical Editor of Technical Analysis of Stocks& Commodities magazine.