The Forex Trading Course : self-study guide to becoming a successful currency trader [PDF]

Summary
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The Forex Trading Course : self-study guide to becoming a successful currency trader – Book

A word on MFE and MAE is in order. MFE means maximum favorable excursion. MAE represents maximum adverse excursion. Here is how it works. When a trade is completed, it has an open time and price, and a close time and price. During that period, the underlying market traveled up and down. The key question for the trader is, what did the result shown in relation to the excursion that the price undertook?

For example, if the trader closed at a profit of 20 pips, if the MFE showed that the price actually was at some point before the close higher by 50 pips, then the trader can be said to have left profits on the table. Ideally, the MFE should equal the profit gained.

In the case of a loss, if the trader lost 20 pips on a trade and the MAE was 50 pips lower, this means the trader was able to recover from a worse loss. The MFE and MAE provide insight into the ability of the trader to recognize highs and lows and navigate through them.