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Maximum favourable excursion

The best unrealised profit a trade reached before closing, which measures how much of each move your exits actually captured.

The gap between MFE and realised result is the profit your exit rules gave back. A trade that reached plus 3.2R and closed at plus 1.1R returned 66% of its run to the market.

Aggregate it to diagnose exits. If the average winner reaches plus 2.4R and closes at plus 1.3R, a trailing method is either too tight or too slow; if losers routinely reach plus 0.8R before reversing, a partial scaling-out rule or a breakeven-stop may add value - which is one of the few contexts where the breakeven rule earns its cost.

Be careful about optimising on MFE alone. The maximum is visible only in hindsight, and rules designed to capture it are the classic route to a beautiful backtest that cannot be traded. See live-vs-backtest-gap.

Related: maximum-adverse-excursion, scaling-out, edge-ratio, live-vs-backtest-gap

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