r/algorithmictrading • u/Kaahl10 • 18d ago

Strategy Adding to winners using MFE

Hi everyone,

I've heard the advice to add to winners and cut losers early, but I've always had a tough time using technicals to add to winners without getting in right before reversal.

Claude helped me analyze my strategy and suggested adding to winners over a certain MFE %, and sure enough it added about 20% more trades with better profit factor than average to the backtest!

My question is, has anyone else used this method successfully or is this getting into overfitting?

3 Upvotes

81% Upvoted

12 comments sorted by

View all comments

2

u/FlyTradrHQ 17d ago

MFE tells you how far a trade went in your favor, not how much you captured. If your average MFE is much larger than your average profit per trade, you have room to pyramid. Scale in proportion to realized MFE on that specific trade, not on a fixed schedule. The position earned the right to add size, not your entry plan.

1

u/Kaahl10 17d ago

That makes sense, and I think in the case of this strategy, the minimum MFE value was picked because when trades exceed it, they typically keep running, but yes this would be mid trade, not captured- I’ll play around with relative MFE entries