MFE and MAE
Also known as: MFE, MAE, Maximum Favorable Excursion, Maximum Adverse Excursion, favorable excursion, adverse excursion
Maximum Favorable Excursion and Maximum Adverse Excursion are, respectively, the highest unrealized gain and the largest unrealized loss a trade reaches between entry and exit, and together they grade exit quality independently of final P&L.
Final P&L tells you what a trade earned. MFE and MAE tell you what it could have earned, and how much pain it cost on the way there. A trade closed at plus fifty dollars that touched plus three hundred along the way has a low MFE-capture ratio and a clear story: the exit gave back most of the available move. A trade closed at plus two hundred that dipped to minus four hundred during the hold has high MAE and a different story: the stop was either too loose or was not honored.
Together the two metrics expose exit discipline in a way that P&L alone hides. Tracking the ratio of realized profit to MFE across many trades gives an empirical answer to whether the trader is taking profits too early, too late, or about right. Tracking MAE relative to the planned stop tells the trader whether the stop is doing its job.
The Gecko diagnosis uses MFE and MAE inputs to grade Hold-Time Discipline and Plan Adherence, both of which depend on the gap between intent and execution at the exit.
Per-trade peak unrealized gain and peak unrealized loss between entry and exit timestamps; ratio of realized P&L to MFE.
Inputs to Hold-Time Discipline and Plan Adherence on the diagnosis.
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