MFE and MAE explained: how much of the move are you keeping?
Maximum favourable and adverse excursion show what happened inside your trades - and where your stops, targets and exits are costing you.
Your P&L tells you where a trade ended. It says nothing about the journey: how far price went in your favour before you got out, or how close it came to your stop before it worked. That journey is where most of the improvement in a trading plan is hiding.
Two measurements capture it.
The definitions
- MFE - maximum favourable excursion. The furthest price moved in your favour while you were in the trade.
- MAE - maximum adverse excursion. The furthest price moved against you while you were in the trade.
Both are measured from your entry, between entry and exit. A long entered at 100 that dipped to 98, ran to 106 and was sold at 103 has an MAE of 2, an MFE of 6, and a realized move of 3.
Efficiency: what you kept
The first question MFE answers is how much of the available move you captured:
Efficiency = realized move ÷ MFE
In the example above, efficiency is 3 ÷ 6 = 50%. You were offered six points and kept three. Low efficiency across many trades usually points to exits: taking profit too early, or letting good trades round-trip.
Clean winners
A clean winner is a winning trade that never went far against you - for example, one where MAE was no more than a quarter of MFE. A high share of clean winners means your entries are well timed: price moves your way soon after you get in.
If most of your winners first went deep against you, your entries are early, and your stop is probably wider than it needs to be.
Scratchable losers
A scratchable loser is a losing trade that went your way first - say, by at least half as much as it eventually went against you. These are the most frustrating trades in any journal, and the most fixable. A break-even rule or a tighter trailing stop would have turned many of them into scratches.
Count them. If a large share of your losers were green at some point, you don’t have an entry problem - you have a trade-management problem.
Read the scatter
Plot every trade with MAE on one axis and MFE on the other and the patterns jump out. Winners cluster where MFE is large and MAE is small. Losers sit where MAE dominates. Losers sitting close to the diagonal - where price went nearly as far for you as against you - are your scratchable trades.
Over time, the medians tell you something even more practical: how far your trades typically run for you and against you. That’s the starting point for setting stops and targets from your own data instead of round numbers.
How Premo helps
Premo Trading reads the price bars inside every closed trade and calculates MFE and MAE automatically, with median MFE, MAE, efficiency, symmetry, clean-winner and scratchable-loser rates, and the scatter plot - for any symbol and any period.
This article is educational and is not investment advice. Trading involves substantial risk of loss.