Maximum Adverse Excursion - futures trading

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Maximum Adverse Excursion

The Maximum Adverse Excursion, commonly abbreviated MAE, is a term used to measure how much a trade moves against you from the entry point, usually expressed in ticks. For example, if your entry price on a long position trade in Crude Oil is 76.00, and while you were in this trade the market moved against you to a low price of 75.75, this represents a MAE of 25 ticks (76.00 - 75.75).


[top]Useful as a benchmark, or in backtesting
Using MAE, or its counterpart MFE (maximum favorable excursion), can be very useful as a sort of benchmark to measure your trades against, or to analyze over a large sample of trades in a backtest.

For instance, if over a 100 trade sample size you find that your MAE average is 20 ticks, then it could suggest your entry price could be improved.
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Created by  Big Mike , July 15th, 2010 at 12:37 AM
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Maximum Favorable Excursion  Big Mike  Terms (Glossary) 0 July 15th, 2010 12:40 AM

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