Metrics

Entry Precision: MAE vs MFE Scatter Analysis

Practice—Process·Trading Analytics

January 31, 20259 min read

Your entries are either costing you money or making you money—and most traders have no idea which. Maximum Adverse Excursion (MAE) and Maximum Favourable Excursion (MFE) analysis quantifies your entry quality with precision.

Understanding MAE and MFE

Maximum Adverse Excursion (MAE) is the largest unrealised loss a trade experiences before closing. If you buy at 100, the price dips to 97 before rallying to 108 where you exit, your MAE is -3 points (or -3%).

Maximum Favourable Excursion (MFE) is the largest unrealised gain before closing. In the same trade, the price reached 110 before pulling back to 108 where you exited. Your MFE is +10 points.

Together, these metrics reveal how much heat you take on entries and how much profit you leave on the table at exits.

The MAE vs MFE Scatter Plot

Practice—Process plots every trade on a scatter chart with MAE on the x-axis and MFE on the y-axis. Each dot represents one trade, coloured by outcome (green for winners, red for losers).

What Healthy Patterns Look Like

Tight MAE, large MFE (top-left cluster): Your entries are precise. Trades move in your favour quickly with minimal drawdown. This is the hallmark of well-timed entries.

Wide MAE, large MFE (top-right cluster): You eventually profit, but you endure significant adverse movement first. Your entries could be improved—you are likely entering before confirmation or at poor levels.

Tight MAE, small MFE (bottom-left cluster): You enter well but exit too early. The trade barely moves against you, yet you capture only a fraction of the available move. This points to a trade management issue, not an entry issue.

Wide MAE, small MFE (bottom-right cluster): The worst pattern. Large drawdowns followed by small gains. These trades are stressful and unprofitable. They often result from hoping rather than following a plan.

Stop Loss Optimisation

MAE data directly informs stop placement. If 90% of your eventual winners never exceed -1.5% MAE, placing your stop at -2% captures nearly all winners while filtering losers that tend to breach -2%.

Practice—Process calculates the optimal stop distance for each strategy based on your MAE distribution:

Tight stop: Captures fewer winners but reduces average loser size

Wide stop: Captures more winners but increases average loser size

Optimal stop: The point where the tradeoff between missed winners and reduced losers is most favourable

The MAE percentile chart shows exactly where this sweet spot lies for your trading style.

Target Optimisation with MFE

Similarly, MFE data reveals where your trades typically peak before reversing. If your average winner reaches +3% MFE but you are exiting at +1.5%, you are systematically leaving half the move on the table.

The MFE distribution chart shows:

Where your trades typically peak

How much profit you capture versus what was available

Whether scaling out at specific MFE levels would improve results

Entry Timing Analysis

By examining MAE across the first few minutes (or bars) of a trade, Practice—Process identifies whether you tend to:

Enter early: Large initial MAE that resolves—you are anticipating the move correctly but entering before price confirms

Enter on time: Minimal MAE from the start—price moves in your direction immediately

Enter late: Small MAE but also small MFE—you are entering after most of the move has occurred

Practical Improvements

If Your MAE Is Too Large

1. Wait for a confirming candle before entering 2. Use limit orders at pullback levels rather than market orders 3. Reduce position size during the initial adverse phase

If Your MFE Is Underutilised

1. Trail stops based on market structure rather than fixed percentages 2. Scale out in thirds: one-third at initial target, one-third at extended target, one-third on a trailing stop 3. Review exits where you left more than 50% of MFE uncaptured

If Both Are Problematic

Focus on entry timing first. Good entries naturally reduce MAE and improve your MFE capture ratio. Once entries are tight, optimise exits separately.

Navigate to Analytics then Entry Precision to explore your MAE/MFE scatter and identify exactly where your entries and exits can improve.

Practice—Process

Trading Analytics