MFE and MAE Metrics

Maximum Adverse Excursion ( Price MAE )
Defines the price of the asset that would have led to maximum losses during the trade.

Maximum Favorable Excursion ( Price MFE )
Defines the price of the asset that would have led to maximizing profits during the trade.

Maximum Adverse Excursion ( Position MAE )
Defines the maximum possible losses that could have taken place during the trade.

Maximum Adverse Excursion ( Position MFE)
Defines the maximum possible profits that could have taken place during the trade.

Why are these metrics important?
These metrics are key are they can answer the following key questions while trading:

• How much profit did I leave on the table?
• What could have been the best possible exit price?
• What are the maximum possible losses I could have taken during the trade?
• What could have been the worst possible exit price?

Answering the questions above can help you better understand whether the trade you took respected your trading rules and whether your exit could have been better or not.

Examples
Let’s assume this trader took a long trade for 2000 shares on BKD @ 4.72.

Price MAE: While in the trade, the maximum price reached was 5.18. Therefore, the MAE is 5.18.
Position MAE: While in the trade, the maximum price reached was $920 ((5.18-4.72)x2000). Therefore, the MAE is $920.

Price MFE: While in the trade, the maximum price reached was 4.645. Therefore, the MAE is 4.645.
Position MFE: While in the trade, the maximum price reached was -$150 ((4.645-4.72)x2000). Therefore, the MAE is -$150.