Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Maximum Favorable Excursion (MFE) % and optimization strategies
R stands for initial risk. If your initial risk is 15 ticks, price moving 15 ticks in your favor would be 1R, 30 ticks would be 2R, and so on. To be more precise, I actually add one tick to initial risk to account for limit fills. So, a trade with initial risk of 15 ticks would require movement of 16 ticks in my favor to qualify as 1R, 31 ticks to qualify as 2R, etc.
Every trade is logged, and a running total of the most recent 20 trades are periodically analyzed to determine how often, in percentage terms, price reaches each milestone. During these 20 trades I may have managed well, managed poorly, or whatever. That part doesn't matter (well, ultimately it matters, but not during method development). It's all about answering the question, "does my method have potential?" I have found that I make money when price gets to 1R 65% of the time or more. Less than that and it becomes difficult to trade. Making money in trading requires that price move in our favor a lot more than it moves against us, and it helps to know if that is happening or not.