risk–reward ratio, the greater the profit in relation to the uncertainty of the out-
come, and the better off we are. In the case of the four-day/1-percent combination
from Figure 19.1, the risk–reward ratio comes out to 0.6. According to Figure 19.2,
this is as good as it will get, given the information from this chart.
To put together a surface chart in Excel, the data first need to be organized
in a matrix, like the portion of one shown in Figure 19.3, which depicts the data
behind the chart in Figure 19.1. Looking at the numbers in Figure 19.1, we can see
that the four-day/1-percent combination in fact has an average profit of 0.450 per-
cent per trade, but also that this wasn’t the highest value. In fact, a couple of val-
ues in the one-day column are much higher, but because they also are surrounded
by lower values, they do not represent as robust and stable variable combinations
as the four-day/1-percent combination. With the data organized in this way, all you
have to do is click the chart wizard button in Excel and follow the instructions. To
get the data collected into a matrix is, however, a completely different story. The
data are normally organized into columns, as in Figure 19.4, which show a small
part of the data behind the matrix in Figure 19.3.
The data sort, row( ), column( ), and index( ) functions in Excel are used to
move data from the columns in Figure 19.4 to the matrix in Figure 19.3.
Getting the data into the columns in Figure 19.4 is a whole lot easier, but let’s
examine the columnar data. In this case, column A holds the ticker symbol for the
markets tested; column B holds an index number for the test run (we will talk more
about this later); column C holds the values for the stop-loss input variable; column
D holds the values for the trade-length input variable: and column E holds the val-
ues for the output variable, which in this case is the average profit per trade.
Note that in the case of Figure 19.4, each market has been tested 10 times
with the exact same setting for the input variables (columns C and D), but with aCHAPTER 19 Placing Stops 215
FIGURE 19.3
Matrix of data for Excel chart.