By Benjamin Roure L'Hermitte
Your journal records how a trade ended. It forgets the path: how far price moved in your favour before you exited, and how far it moved against you before coming back. Those two numbers have names, MFE and MAE.
- MFE, maximum favorable excursion: the best moment a trade had while it was open.
- MAE, maximum adverse excursion: its worst moment, the furthest price travelled against you.
- An MFE far above your result means you exit too early, repeatedly.
- An MAE far below your stop makes a tighter stop a setting to test, not a certainty.
A journal is first read as a series of outcomes: won, lost, by how much. That is a two-dimensional reading of a three-dimensional object, because it ignores entirely what happened between entry and exit. Yet that is where two mistakes the result never shows live: exiting too early, placing the stop too far away.
MAE and MFE measure that path. They are two price distances, recorded over the life of the position. The measure comes from John Sweeney, whom his publisher presents as the developer of MAE and whose book Maximum Adverse Excursion (Wiley, 1997) measures price excursion from a set point of entry.
Maximum adverse excursion: the MAE definition in trading
MAE, or maximum adverse excursion, is the greatest distance price travelled against your position while it was open: “the maximum potential loss recorded during the lifetime of open positions”, says the MetaTrader 5 help on the trading report. On a long, it is the gap between your entry and the lowest price printed before you exited. On a short, it is the gap to the highest. It is expressed in price points, in account currency, or as a multiple of your initial risk, the familiar R.
Reading it is immediate: a winning trade whose MAE came close to your stop was won narrowly, and nothing in your result shows that. Two trades returning the same amount can have opposite MAE values, one comfortable, the other on the edge. It is information about the quality of your entry, not about its outcome.
MAE is not maximum drawdown: MAE is measured on one trade, from its entry price, while maximum drawdown is measured on the whole equity curve, from a peak. On a funded account the two meet: where the daily loss limit counts open positions, a trade's worst moment counts against it even if that trade ends in profit.
Maximum favorable excursion: the MFE definition in trading
MFE, or maximum favorable excursion, is the greatest distance price travelled in your favour during the life of the trade. It is the gain you would have booked by exiting at the single best moment, the “maximum potential profit” of the same help page, which serves as a reference.
The point is not to aim for that maximum, which would be absurd. The point is to measure the gap between it and what you actually took, and above all to see whether that gap repeats. An occasional gap is noise. A systematic gap is a behaviour, and behaviours can be corrected.
The two diagnoses MAE and MFE make possible
The first concerns your exits. The MetaTrader 5 help on the trading report says to compare average MFE with the average actual profit “to assess unrealized potential”, without setting a threshold: if the gap is wide and it repeats, you exit too early. The leaning has been measured: across 10,000 accounts at a US discount broker, Terrance Odean's study of the disposition effect found that individual investors realize their gains more readily than their losses. Worth trying: a written exit rule.
The second concerns your stop. For the MetaTrader 5 help on the testing report, MAE “best characterizes the use of protective Stop Loss”. If it stays well inside your stop across dozens of trades, a tighter stop is a setting to test: at constant risk it allows a larger size, but it also takes out the trades that needed that room.
| What you observe | What it means | What you change |
|---|---|---|
| MFE far above average win | You exit too early, repeatedly | A written exit rule |
| MAE far below the stop | Your stop may be too wide | Test a tighter stop, at constant risk |
| MAE near the stop on winners | Your winners were nearly stopped out | Revisit the entry or the stop distance |
| MFE near zero on losers | The trade never worked | Check the validity of the signal |
To choose the stop distance to test, the Oshi Academy lesson on the ATR indicator starts from market volatility; the article on where to place your stop loss covers where to put it.
The definitions in one table
Here are the MAE MFE terms you will meet on trading platforms, and what each one covers.
| Term | Definition | Read in |
|---|---|---|
| MAE | Maximum adverse excursion: furthest price travelled against the position | Points, currency, R |
| MFE | Maximum favorable excursion: furthest price travelled in favour of the position | Points, currency, R |
| Max favorable excursion | Same as MFE, with “maximum” shortened | Points, currency, R |
| Excursion | The distance travelled by price while the position was open | Points |
| R | One unit of initial risk, used to compare trades of different sizes | Multiple |
MAE and MFE keep the same definition trading futures, forex or stocks: both are measured from your entry price, over the exact window the position stayed open. MAE analysis and MFE analysis are therefore the same operation run in two opposite directions. Both measures complement the result indicators described in our guide to analyzing your trading performance.
Each measure has its own glossary entry: the definition of MAE, which looks at stop placement, and the definition of MFE, which looks at the timing of the exit.
Why these two numbers are missing from a broker statement
Because a statement lists executions, not a path: the one described in the MetaTrader 5 help on account statement reports details orders, deals, positions and an account summary, with no MFE or MAE. That path has to be pulled from price history, candle by candle, over the exact window your position was open.
That is why a spreadsheet cannot compute them without considerable work. The MetaTrader 5 trading report, for its part, gives their average across all positions.
Read them in R rather than in currency
Expressed in currency, MAE and MFE cannot be compared across trades, since sizes vary. Expressed in R, the multiples of initial risk defined in the Van Tharp Institute's trading concepts, they become comparable: an MFE of 3R means the trade offered three times what you risked, whatever the position size.
That normalisation lets you look at the distribution, not just the average. Are your MFE values all around 1R, or are there a few at 5R that you cut at 1? In the second case, a decent win rate can hide a flat result: you bank the small gains and let the big ones slip.
The glossary details the three readings built on them: average MFE in R, average MAE in R and the worst winner MAE, the deepest dip endured by a trade that ended positive.
How Tradoshi computes MAE and MFE
Tradoshi computes them for your closed trades, from price candles covering the life of the position, and returns them in three forms: as a price distance, in your account currency when the point value can be derived, and in R when the trade carries a stop loss. The calculation runs on demand; a symbol or a period the candle source does not cover stays without a figure.
They are then read alongside the rest: the trading dashboard to spot the patterns, and the trade-by-trade journal to understand a specific case. They make sense over dozens of positions, not three.
Frequently asked questions
What is MAE in trading?
MAE stands for maximum adverse excursion. It is the greatest distance price travelled against your position while it was open, measured from your entry price. The maximum adverse excursion is expressed in price points, in account currency, or as a multiple of your initial risk.
What is MFE in trading?
MFE stands for maximum favorable excursion. It is the greatest distance price travelled in favour of your position before it closed, in other words the best result that trade could have produced had you exited at the highest point on a long, or the lowest on a short. That maximum favorable excursion definition holds across every market.
MAE vs MFE: what does comparing them tell you?
Compared with each other and with your actual result, they separate two problems the result alone conflates: an exit problem, when MFE far exceeds what you took, and a stop placement problem, when MAE stays well inside it. Those call for two different corrections.
Is a high MAE necessarily bad?
No. A high MAE on a method that deliberately gives price room to breathe is normal. What matters is the comparison with your stop: an MAE that consistently brushes the stop on winning trades invites you to revisit the entry or the stop distance, while an MAE that stays far from it makes a tighter stop a setting to test.
Can you calculate MAE and MFE in a spreadsheet?
In theory yes, in practice with great difficulty: neither number appears in a broker statement. You have to retrieve minute price history over the exact window of each position, then extract the extremes. That is the work an automated journal does for you.
How many trades before these numbers are reliable?
They describe each trade individually from the first one, but they only serve as a diagnosis over dozens of positions. A gap between MFE and result observed across five trades is not a behaviour, it is a coincidence. Repetition is what turns the measurement into a decision.