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Measuring MFE
Started:November 26th, 2012 (04:26 AM) by MarpleTrading Views / Replies:406 / 2
Last Reply:November 26th, 2012 (05:04 AM) Attachments:0

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Measuring MFE

Old November 26th, 2012, 04:26 AM   #1 (permalink)
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Measuring MFE

I have a question about measuring the MFE.

Is this measured only during the trade, or are you also looking what would have been possible would you not have exited the trade?

When the latter is true, how long will you be looking? Till your initial stop would have been reached?

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Old November 26th, 2012, 04:26 AM   #2 (permalink)
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Old November 26th, 2012, 05:04 AM   #3 (permalink)
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MFE Explained

MFE is the "maximum favorable excursion" (or maximum favorable movement) while you are in the trade.

MAE is the "maximum adverse excursion" (or maximum adverse movement) while you are in the trade.

Often it's worthwhile monitoring where a trade went after you exited to determine whether your system could be improved. This is particularly useful if you're relatively new to the system. However, that is not MFE as it's usually defined. But it would be MFE if your system was defined differently so that you were in the trade until that different point.

Cheers Rachel

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