Readers reviews of Maximum Adverse Excursion
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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
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