MAE and MFE in Trading: How to Spot Tight Stops and Early Exits
MAE is how far price went against a trade, MFE how far it went your way. A worked example, ETD and the share of the move you kept, and how to read them over many trades.
A trade's result tells you how much you made or lost. It says nothing about what happened between entry and exit. Two measures fill that gap: MAE and MFE. John Sweeney described the method in detail in his 1997 book Maximum Adverse Excursion. Today trading platforms calculate both, the MetaTrader 5 strategy tester among them.
What are MAE and MFE?
MAE (Maximum Adverse Excursion) is the furthest price moved against your position during the trade. MFE (Maximum Favorable Excursion) is the furthest it moved in your favor. Both are measured from the entry price.
A third measure, ETD (End Trade Drawdown), shows how much profit the trade gave back between its peak and the exit. It is the difference between MFE and the result.
MAE = Entry price − Lowest price during the trade
MFE = Highest price during the trade − Entry price
ETD = MFE − Trade resultFor a short it is the other way round: MAE is measured to the highest price and MFE to the lowest.
You can record them as a price distance (per coin or per share) or as money for the whole position (distance × size). Price distance compares trades on one instrument; money shows what the swing cost you.
They are easiest to compare in R. 1R is the loss your stop would give. An MAE of 0.5R means price went halfway to your stop. In R you can compare trades of any size and on any instrument.
MAE and MFE example: one trade
You buy 2 ETH at 2,500 USDT with a stop at 2,450. The risk is 50 USDT per coin, 100 USDT for the position: that is 1R. While the trade was open, price fell to 2,470 and rose to 2,600. You closed at 2,540.
- MAE. 2,500 − 2,470 = 30 USDT per coin, 60 USDT for the position. That is 0.6R.
- MFE. 2,600 − 2,500 = 100 USDT per coin, 200 USDT for the position. That is 2R.
- Result. 2,540 − 2,500 = 40 USDT per coin, 80 USDT for the position. That is 0.8R.
- ETD. 2R − 0.8R = 1.2R, or 120 USDT.
The trade made money, but it gave back more than it kept. Of a 200 USDT move you took 80, or 40%. That share, result ÷ MFE, is how much of the move you kept. One trade proves nothing: price could have turned by chance. The pattern only shows over dozens of trades.
How to read MAE and MFE across many trades
Plot your trades as dots on two scatter charts. On the first, MAE goes along the horizontal axis and the result up the vertical. On the second, MFE goes along the horizontal and the same result up the vertical. The MetaTrader 5 tester calls these charts “MAE-Profits Distribution” and “MFE-Profits Distribution”. You can plot your real trades the same way in any spreadsheet.
Then look for familiar shapes:
| What you see | What it may mean |
|---|---|
| Winners rarely go against you further than, say, 0.4R, while losers run to the stop | A trade that goes past that line rarely turns into a winner |
| Many winners have an MAE close to the stop: 0.8–1R | The stop sits inside normal price noise and knocks out good trades like these |
| The MFE of winners is on average 2–3 times the result | You exit too early and take a small part of the move |
| Losing trades were often up 1R or more | Profit is handed back in full; review how you manage open trades |
| Most trades have a small MAE and a large MFE | Entries are precise: price moves your way right after entry |
Stop too tight. The sign is a cluster of MAE right at the stop. Winners barely survive; losers get stopped out at exactly −1R. The stop sits where price goes even when the idea is fine.
Exit too early. The sign is a wide gap between MFE and the result on winning trades. The closer the dots sit to the line “result = MFE”, the more of the move you capture.
Stop too wide. The opposite sign: winners almost never go against you past some line, yet the stop sits far beyond it. Every loss then costs more than it needs to.
An example. A journal holds 60 trades of one setup, each with a 1R stop. 33 of them went more than 0.5R against you. Only 2 of those ended in profit; the other 31 hit the stop. With a 0.5R stop and the same position size, each of those 31 trades would have lost 0.5R instead of 1R: 15.5R less in total. But the 2 winners would have closed at −0.5R each. If together they made less than 14.5R, the tighter stop is better. That is a decision made with numbers, not feelings.
Split trades by setup, meaning by entry rule. A breakout and a bounce draw different pictures, and in one pile they blur together. Before you change a rule, check it on trades you did not use to find it: a pattern found in old trades can be chance.
Key takeaways
- Record MAE and MFE in R for every trade. After a few dozen trades they show where your stop and your exit belong. A trading journal is the natural place for them.
- Test before you change. Before you move a stop, count how many past winners it would have stopped out.
Sources
- MetaTrader 5 Help: Testing Report: MFE and MAE definitions, the MFE-Profits and MAE-Profits Distribution charts and how to read them.
- John Sweeney, Maximum Adverse Excursion: Analyzing Price Fluctuations for Trading Management (Wiley, 1997): the book that set out the method.
- TradeStation Help: Maximum Adverse Excursion: the MAE scatter chart and its use for stop placement.
- NinjaTrader 8 Help: Statistics Definitions (archived copy): MAE, MFE and ETD, with average ETD = average MFE − average trade.
