WY-06-29 / 09
MAE, MFE, and the Entire Trade's Continuous Net PnL Curve
Decisions, Execution & Validation
Lesson / WY-06-29
This course calculates Maximum Adverse Excursion (MAE) and Maximum Favorable Excursion (MFE) from the whole trade's time series of net liquidation PnL, beginning at the zero-PnL baseline before entry. Let N(t) be cumulative net PnL through time t if all remaining positions were closed at executable quotes then. MAE＝max[0, −minₜN(t)], and MFE＝max[0, maxₜN(t)]. Platforms may instead define these as the distance from entry price to the worst or best price during holding. Confirm formulas before comparing; do not mix the definitions.
Course content is for learning and research only. It is not investment advice.
Read the Chapter ↗Timestamps
13 lessons · Chapter contents
01Price and Time Expectations After Entry↗02Meeting Expectations, Underperforming, and Contrary Evidence↗03Changes in Holdings, Cost, and Risk After Scaling In or Out↗04Structural Exits, Time Exits, and Moving Stops↗05Improvised Plan Changes Versus Evidence-Based Rule Revisions↗06Execution Deviations and Their Technical Consequences↗07Four-Layer Review: Observation, Interpretation, Decision, and Execution↗08Initial Risk Amount R₀ and After-Cost R↗09MAE, MFE, and the Entire Trade's Continuous Net PnL Curve↗10Operational Definitions of Trading Rules↗11Samples, Future Information, Out-of-Sample Testing, and Costs↗12Win Rate, Profit/Loss Distribution, Expectancy, and Drawdown↗13Rule Changes and Version Control↗Observe the market: start with context and place price within its structure.
Understand structure: compare supply and demand, and let evidence support or revise your hypothesis.
Form a view: define risk limits and know when to reassess.
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Relative Strength and Opportunity Screening
Point-and-Figure Charts and Price Target Estimation
