# MAE and MFE > Maximum adverse excursion and maximum favourable excursion show how far trades move for and against you. Learn to record them and use them to tune stops and targets. Source: https://learn.tradelabsai.com/risk/mae-and-mfe/ Track: Risk Management · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "MAE and MFE", https://learn.tradelabsai.com/risk/mae-and-mfe/ Maximum adverse excursion (MAE) and maximum favourable excursion (MFE) measure what happened inside a trade while it was open. MAE is the furthest price moved against you; MFE is the furthest it moved in your favour. Popularised by John Sweeney in his book on the subject, they are among the most practical tools for improving stop placement and profit taking, because they are based on your own trades rather than general rules. ## Definitions | Measure | For a long trade | Tells you | |---|---|---| | MAE | Entry price minus the lowest price reached while in the trade | How much heat the trade took | | MFE | Highest price reached while in the trade minus entry price | How much profit was available | Both are best recorded in R multiples, where 1R is your initial risk, so trades of different sizes and markets can be compared. **Example: Recording one trade** You buy at $50.00 with a stop at $48.00 (1R = $2.00). Price dips to $49.20, then rises to $55.40, and you exit at $53.00. MAE = $0.80 = 0.4R. MFE = $5.40 = 2.7R. Result = +1.5R. The trade never came close to the stop, and more than a third of the available profit was left on the table. ## What MAE tells you about stops Collect MAE for many trades and compare winners with losers: - If **winning trades rarely have MAE beyond 0.5R**, while losers mostly reach the full 1R, your stops may be wider than needed. A tighter stop could cut losses without stopping out many winners. - If **many eventual winners first dip to 0.9R or more**, your stops are about right or even tight, and tightening would turn winners into losers. **Example: A stop analysis** Over 80 trades, 90% of winners had MAE below 0.6R. Losers almost all reached 1R. Moving the stop to 0.7R of the original distance would have stopped out only a few winners while cutting average loss by about 30%. The trader tests the change on paper for the next 40 trades before adopting it. ## What MFE tells you about targets - If **average MFE on winners is much larger than your average exit**, you are taking profits too early. Consider trailing stops or partial exits. See [Scaling Out and Partial Profits](https://learn.tradelabsai.com/position-management/scaling-out-and-partial-profits/). - If **many losing trades had MFE of 1R or more** before reversing to the stop, you may benefit from moving stops to breakeven earlier, or taking partial profits sooner. See [Moving Your Stop: Breakeven and Trailing Stops](https://learn.tradelabsai.com/position-management/breakeven-stop/). ## Building an MAE/MFE log Add these columns to your [Trading Journal](https://learn.tradelabsai.com/start-here/trading-journal/): 1. Entry, initial stop, initial risk (1R). 2. Lowest price during the trade (for longs) and highest price. 3. MAE and MFE in R. 4. Final result in R. Many platforms and journaling tools record excursions automatically from your fills and price data. ## Using the data wisely - **Sample size:** wait for at least 30 to 50 trades of one setup before drawing conclusions. - **Change one thing at a time:** adjust stops or targets, not both at once. - **Test before adopting:** apply new rules on paper or small size first. - **Watch for regime changes:** excursions differ between calm and volatile markets. ## Common mistakes - **Optimising stops to past data too precisely,** which can fit noise. See [Overfitting and Curve Fitting](https://learn.tradelabsai.com/research/overfitting-and-curve-fitting/). - **Ignoring MFE on losing trades,** which often reveals the biggest opportunity. - **Measuring in dollars** instead of R, which makes trades hard to compare. ## Frequently asked questions ### What is maximum adverse excursion? The largest move against your position while the trade was open, showing how much drawdown the trade experienced before closing. ### What is maximum favourable excursion? The largest move in your favour while the trade was open, showing how much profit was available at the best point. ### How do MAE and MFE improve trading? They show whether your stops are too wide or tight and whether you exit winners too early, based on your own trade history. Next, learn how to manage your trading capital as a whole with [Bankroll Management](https://learn.tradelabsai.com/risk/bankroll-management/). ## Continue learning - Next lesson: [Bankroll Management](https://learn.tradelabsai.com/risk/bankroll-management/) - Previous lesson: [Losing and Winning Streaks](https://learn.tradelabsai.com/risk/losing-and-winning-streaks/) - Related: [Losing and Winning Streaks](https://learn.tradelabsai.com/risk/losing-and-winning-streaks/): Losing streaks are a normal part of any strategy. See how long streaks get at different win rates, why they happen and how to handle them without breaking rules. - Related: [Trading Journal](https://learn.tradelabsai.com/start-here/trading-journal/): A trading journal records every trade so you can find what works and what keeps costing you. Learn what to log, a template and how to review it. - Related: [Post-Trade Analysis](https://learn.tradelabsai.com/start-here/post-trade-analysis/): Post-trade analysis turns every trade into a lesson. Learn how to grade decisions separately from results, find repeat mistakes and improve your plan. - Related: [Stop Loss Strategies](https://learn.tradelabsai.com/risk/stop-loss-strategies/): A good stop sits where your trade idea is proven wrong. Compare structure, volatility, percentage and time stops, with examples and the mistakes to avoid. - Related: [Profit Targets](https://learn.tradelabsai.com/position-management/profit-targets/): Good profit targets come from market structure, not wishes. Learn target methods using levels, measured moves, ATR and R multiples, and how to manage them. - Related: [Expectancy](https://learn.tradelabsai.com/risk/expectancy/): Expectancy is the average amount you win or lose per trade. Learn the formula, how win rate and payoff combine, expectancy in R and how to improve it.