Question on Entry Efficiency

[Austiner87]

Hi NT8,

please see the attached picture of my entry efficiency for a sample of around 441 trades. I see that many losing trades have an entry efficiency of less than 25% and most of my winning trades are above that. Looking at this graph, I am considering trying to code IF(entry efficiency for the trade I just entered is lower than 25%) THEN (immediately exit that trade, because it is very likely to be a loser and I want to minimize my losses). Is it possible to do this? is that a good conclusion from what i am seeing on the graph? Can you please comment on how I would try to code that to test it?

[UltraNIX]

I suppose it's the other way around. Entry efficiency, to my mind, should be calculated in regards of whether the trade "went against you" after entry and by how much, meaning, if it was never in the loss, entry efficiency should be 100%, while if it was never in profit - it should be 0%. So your 25% (overall) is on the lower side of the equation, and probably the edge is not there with your strategy.

However, you can make adjustments for your entry rules, like use limit orders for entry with some variation of MAE (maximum adverse excursion, i.e. by how much trade goes against you). Let's say your average MAE is 20 points. So you could expand your entry logic to: when entry singal is produced -> set buy limit order of a price that is 20 points less than current price. If it never reaches your price - let it be, but if it does, you've just saved yourself 20 points of losses and could proceed from here.

[UltraNIX]

I should add, that there's no way to know upon entering a trade whether it has 0%, 25% or 100% entry efficiency, you can only look backwards, not into the future.

[NinjaTrader_Kate]

Hello Austiner87,

Thank you for your post.

UltraNIX is correct in their assessment here. You can't know the entry efficiency before the trade is exited. I think potentially trying their suggestion of setting entries with limit orders based on average MAE to see how that works out might be about the closest you'd get to deal with that.

Please let us know if we may be of further assistance to you.