MFE and MAE in trading: what they are and how to use them
MFE and MAE answer two questions about every trade: how far did it go in my favour, and how far against me? Together they show whether your stops are too tight, your targets too greedy, or your exits too early.
The short version
MFE is the most a trade was in profit before you closed it; MAE is the most it was in loss. Look at the MAE of your winners to place stops, and at MFE versus what you actually captured to judge your exits. But they only help once you're taking the same setup consistently.
- You trade one setup the same way every time
- You have 50 or more trades of it
- Your stops and targets are fixed in advance
- You still move stops or take random trades
- You haven't got a consistent setup yet
- You don't know yet which mistake costs you most
What MFE and MAE mean
- MFE (maximum favorable excursion): the biggest open profit the trade reached before you exited.
- MAE (maximum adverse excursion): the biggest open loss the trade reached before you exited.
Example: long NQ at 21,500. Price dips to 21,488, runs to 21,560, and you exit at 21,530. MAE is 12 points, MFE is 60 points, and you captured 30 of those 60.
Using MAE to place stops
Look at the MAE of your winning trades. If almost all of them went no more than 8 points against you, a 15 point stop is giving losers room they don't need. If many winners went 12 points against you first, an 8 point stop is taking you out of good trades.
Using MFE to judge exits
Compare MFE to what you captured. Consistently capturing a third of the move means you exit too early. Losing trades with a big MFE, trades that were well in profit and came back to a loss, usually point to a missing rule, like moving the stop to breakeven after a set move.
The catch
MFE and MAE fine-tune a strategy you already execute consistently. If you still move stops, add to losers or take trades outside your plan, those habits cost far more than a few points of stop placement. Fix the expensive habits first.
Actal doesn't calculate MFE and MAE yet. It starts with the part that costs most traders more: checking every trade against your plan and putting a dollar cost on each mistake. See trading expectancy and R-multiple for the numbers that come first.
Who wrote this
I'm Joakim. I trade index futures full time and coach traders one-on-one at Jusell Trading Academy.
Questions people ask
Drop in one export. In a minute Actal grades the trades it can, prices the mistakes you tagged, and tells you the first thing to fix. Free during beta, no card.
Full-time index futures trader. Coaches traders one-on-one at Jusell Trading Academy, five students at a time, since 2020. No platform was built for developing traders, so he had his own coaching software built; old students loved it and kept coming back, and Actal is that software turned into a proper journal for what matters.