Lesson 22 of 29 · About 13 min

MAE and MFE in trading: what your trades did before you exited

Maximum adverse and favourable excursion record how far each trade went against you and for you before the exit. Read across your own log, they show whether stops sit inside normal noise and whether exits leave most of the move behind.

Start in plain English

Your log records where each trade entered and exited. It usually does not record what happened in between: how far the trade went against you before it worked, or how far it went for you before you sold. Those two numbers are maximum adverse excursion (MAE) and maximum favourable excursion (MFE). For a small-cap scalper they answer two practical questions with your own data: are my stops sitting inside ordinary noise, and are my exits leaving most of the move behind?

The core idea, stated once: MAE is the worst price against your position between entry and exit; MFE is the best price in your favour over the same window. Both are measured from your entry fill, in cents per share and in R. A long trade entered at $3.40 that dipped to $3.32 and later traded $3.61 before you sold had an MAE of 8 cents and an MFE of 21 cents. Neither number is a rule. Across many trades, they show the shape of your setups.

Two paths from the same start

All prices, sizes and costs in this example are Illustrative. Pellmoor Labs is fictional.

The plan, written before entry. Long at $3.40, target $3.58 (18 cents). Risk $60 per trade. Two stop placements are compared on the same trades:

Tight stop at $3.34 (6 cents): 1,000 shares, fees $5.00 round trip.
Wide stop at $3.28 (12 cents): 500 shares, fees $2.50 round trip.

Both risk $60 at the stop. The wider stop buys room by holding half the shares, so the same 18-cent target is 3R for the tight stop and 1.5R for the wide one. Stop exits assume one cent of slippage.

Path AA dip, then the move

Price dips to $3.32 (MAE 8 cents), then runs to $3.58.

Tight stop: triggered at $3.34, filled at $3.33. −$70 − $5 = −$75, −1.25R. Wide stop: survives the dip and sells at the target. +$90 − $2.50 = +$87.50, +1.46R.

Path BThe trade fails

Price falls through both stops without a meaningful bounce (MAE 13 cents or more).

Tight stop: filled at $3.33, −$75, −1.25R. Wide stop: filled at $3.27, −$65 − $2.50 = −$67.50, −1.13R. With risk fixed in dollars, the wider stop does not lose more on a clean failure; it loses about the same.

Path CNo dip at all

Price runs straight to $3.58 with an MAE of 2 cents.

Tight stop: +$180 − $5 = +$175, +2.92R. Wide stop: +$87.50, +1.46R. Here the tight stop's larger size doubles the winner.

Review note: "Plan followed; stop as written; outcome A, B or C." Each stop placement wins on some paths. Which one does better over many trades depends on how often winning trades dip past the tight stop first (Path A) compared with how often they run without a dip (Path C). That is exactly what MAE measures. The rest of this lesson shows how to record MAE and MFE, read them across a log, and use them for stop and exit reviews.

Measuring MAE and MFE

For each trade, record from the entry fill until the exit:

MAE = entry − lowest price (for a long), in cents per share. Divide by planned risk per share to get MAE in R.
MFE = highest price − entry (for a long), in cents per share and in R.
For shorts, reverse the signs.
This lesson quotes MAE as a distance. The practice log's mae_r column stores it as 0 or negative, so 7 cents against the position on a 12-cent stop is mae_r = −0.58.

Three measurement choices change the numbers, so write them down:

Window. Entry to exit is the default. To compare exit rules fairly, also record a fixed window (for example the first 10 minutes), because a trade you exited early had less time to make an MAE or MFE.
Data resolution. One-minute bars (how to read candlestick charts) give an approximation. The entry minute is the problem: its low may have printed before your fill. Either use the next full bar onward, or use seconds or tick data, and say which.
Odd prints. A single off-market print can set an MAE that no order could have traded at. Note suspected bad prints instead of silently removing them.

End-trade drawdown (ETD) is MFE minus the realized result: how much of the best open profit was given back before the exit. A trade with MFE +2.5R that closed at +0.5R had an ETD of 2.0R.

Odds box

In this sample the two stops land within about 0.02R per trade of each other (computed from the assumed distribution, Illustrative). The MAE table shows why: a third of the winners needed more than 6 cents of room, and that cost the tight stop about as much as its double size earned on the clean runs. Shift a few winners from the 7–9 cent group into the 4-cent group and the tight stop pulls ahead; shift them the other way and the wide stop does. The answer lives in the MAE distribution of your own trades.

Reading MAE and MFE across a log

Two scatter plots carry most of the information. Plot one dot per trade.

MAE (x-axis) against final R (y-axis). Look at the winners. If most winners have MAE well inside your stop, the stop is rarely the reason a good trade fails. If many winners cluster just inside the stop, small changes in noise would have stopped them, and some losers on the far side may have been shaken out of trades that later worked. Losers with MAE far beyond the stop show slippage, halts or stops that were not honoured.

MFE (x-axis) against final R (y-axis). Dots near the diagonal are trades that exited near their best price. Dots far below the diagonal gave back a lot (large ETD). Losers with MFE above +1R are trades that were well in profit and ended in a loss; count them, because they are the case a break-even stop or a partial is designed for (Scaling in and out; Exits compared).

A useful table to keep next to the plots:

Question	Number to compute
How often do winners dip near the stop?	Share of winners with MAE above 75% of the stop distance
How often do losers first go well in profit?	Share of losers with MFE above +1R
How much do exits give back?	Median ETD of winners, in R
Are stops honoured?	Share of losses with result below −1.2R

Observe vs. infer

A learner's review note reads: "My stop is too tight. Look how many trades came back after stopping me out." Separate the observation from the claim.

What the log shows (observed)	What is inferred	Why it is not established
13 of 58 stopped trades later traded at the target price the same morning	"My stop is too tight"	Trades that came back after the stop are visible only in hindsight; the wider stop also halves size and changes every other trade
40 winners had a median MAE of 5 cents	"A 6-cent stop is enough"	The median says nothing about the 13 winners that dipped further; the tail is what the stop decides
Losses averaged −1.25R	"Bad luck on fills"	One cent of slippage on a 6-cent stop is 0.17R by itself; the size of the stop in cents drives that

The right comparison is the one in the odds box: score both stops on all the trades, winners, losers and scratches, after costs.

What shifts the odds

No FennEdge study measures MAE or MFE for scalps. These are hypotheses to record, not findings:

Typical 1-minute range at entry. A stop smaller than the normal range of one bar is inside noise more often; Where a stop goes covers this.
Time of day. Opening minutes on gappers often have wider ranges; compare MAE by time bucket.
Spread at entry. A wide spread adds to MAE immediately, because a long position is marked against the bid.
Entry type. Entries on a breakout and entries on a pullback can have very different MAE profiles; keep them under separate tags.
Halts. A halt makes MAE jump in one step; keep halted trades in a separate column.

Cost of being wrong

Using the Pellmoor Labs plan ($60 risk; Illustrative):

Outcome	Tight stop (1,000 shares)	Wide stop (500 shares)
Target	+2.92R (+$175.00)	+1.46R (+$87.50)
Stop, 1 cent of slippage	−1.25R (−$75.00)	−1.13R (−$67.50)
Time stop at entry	−0.08R (−$5.00)	−0.04R (−$2.50)
Halt down, reopens at $3.10	−5.08R (−$305.00)	−2.54R (−$152.50)

The halt row is where stop width and size interact most: a halt skips both stops, so the larger share count of the tight stop doubles the damage. MAE from normal trading days says little about this row; size for it separately (Position sizing for scalps).

How many trades before this means anything

The MAE tail is what decides stop placement, and tails need many observations. In the odds box, the decision turns on 13 of 40 winners. With 40 winners in a real log, a share of 33% has a 95% Wilson interval of roughly 20% to 48% (computed on these hypothetical counts). That range covers both "the tight stop wins" and "the wide stop wins". Collect at least 100 trades per setup before moving a stop on MAE evidence, and compare stops on the same trades, as above. How many trades before your numbers mean anything explains the interval.

What this lesson does not claim

It does not claim any stop width is correct. The MAE distribution is Illustrative.
MAE and MFE describe what happened after entry. Used to pick a stop, they are a review tool on past trades, not a forecast for the next one.
A wider stop is not safer by itself: at fixed dollar risk it holds fewer shares, which changes every winner as well.
Pellmoor Labs and all prices and costs are fictional and Illustrative.

Go deeper

FennEdge first.
- If you trade live, on Plus and above the Trading Journal shows each closed trade on its session's 1-minute chart (unadjusted, ET) with every fill marked, so you can read an approximate MAE and MFE for real broker-synced trades. As of 2026-10-05, Journal Review (Pro or Max) shows an estimated per-trade MFE and MAE in dollars, from 1-minute bars and before fees; the Journal does not compute R per trade, so R-based excursions still come from your own log. The Journal holds broker-synced trades only, not practice or simulated entries.
- DAS course: Chart bars, studies and observation windows covers reading bar data within a defined window; An order audit and reconciliation worksheet shows how to reconcile fills, which fixes the entry price MAE is measured from.
R first. MAE and MFE in R need a fixed 1R per trade; see R multiple.
MAE-based stop review. Sweeney (1997) introduced MAE as a way to set stops from the excursions of past trades. Apply it to your own log only, with enough trades in the tail.
Backtests. Excursion statistics from a backtest inherit every backtest problem, including look-ahead and bad prints; see Backtesting intraday ideas.
Reviewing. Reviewing scalps shows where MAE and MFE columns sit in a review routine.

Exercises

Six exercises follow this lesson: three concept checks (what MAE measures; why the entry minute is a problem with 1-minute bars; why "came back after my stop" is not enough evidence), two calculations (MAE and MFE in R for one trade; the tight-stop expectancy from an MAE distribution) and one practice task. Exercises, answers and progress are available after signing in.

Practice task: record excursions for 30 trades. This is the sixth exercise (ungraded). In a simulator or on replayed charts, take or replay 30 trades of one setup with a fixed stop and target, and log every one in the FennEdge practice log: download the practice log (CSV), with a column guide. Record MAE and MFE in R for every taken trade in the mae_r and mfe_r columns (mae_r is 0 or negative, for example -0.58), measured from the bar after the entry minute and filled after the exit. Then build the table above. Keep the log separate from the Trading Journal, which holds only real broker-synced trades.

Primary sources

Sweeney, J. (1997). Maximum Adverse Excursion: Analyzing Price Fluctuations for Trading Management. Wiley.
Wilson, E. B. (1927). Probable Inference, the Law of Succession, and Statistical Inference. Journal of the American Statistical Association 22(158).
FINRA. Types of orders.

Sources checked 2026-10-05. Pellmoor Labs and all prices, excursion distributions and costs in this lesson are fictional and Illustrative. This lesson is education, not a recommendation to buy or sell any security. Past patterns do not indicate future results.