Maximum Favorable Excursion - futures trading

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Maximum Favorable Excursion

The Maximum Favorable Excursion, commonly abbreviated MFE, is a term used to measure how much a trade moves in your favor 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 in your favor to a price of 76.50, this represents a MAE of 50 ticks (76.50 - 76.00).


[top]Useful as a benchmark, or in backtesting
Using MFE, or its counterpart MAE (maximum adverse 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 MFE average is 50 ticks but your gross profit average is only 25 ticks, then it could suggest your exit price could be improved.
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Created by  Big Mike , July 15th, 2010 at 12:40 AM
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Maximum Adverse Excursion  Big Mike  Terms (Glossary) 0 July 15th, 2010 12:37 AM

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