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Readers reviews of Maximum Adverse Excursion

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Daryl Guppy

This slim book explores a single idea. The idea is straightforward, but the intense mathematics is daunting. The pages of Excel code that make up nearly a third of the book would be much better provided via either a disk, or a web site download.


Sweeneys argument is that good trades tend to move in your favour very quickly. When good trades go against you, they do so by very much. In contrast, bad trades move against you by a very large amount. Their maximum adverse excursion is bigger than winner trades.


Sweeney suggests that if you examine a statistically significant sample of your past trades that you can establish the normal adverse excursion for winning and losing trades. When such normal bounds are exceeded in a new trade, then the losing trade can be closed without reference to any other stop loss techniques. He takes a further step and suggests this normal maximum adverse excursion can be used to set a stop loss point.


All very useful if you have 300 past trades to work with. Less useful for others. This book reads as work in progress, and Sweeney often notes particular ideas that are fruitful areas for additional research. In a book of this nature most readers would expect to see the results of this research. The book is an intriguing introduction to an idea, but it is not a finished product. Readers will see more useful applied work based on the idea of maximum adverse excursion in magazine articles.



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