MFE and MAE: high-water marks, not closes

"It went up 5%" can mean two completely different things. These two numbers keep them apart.

This setup “gained 5%”. It also lost you 8% first.

One trade, three numbers

Follow price for an hour after some moment and you get three numbers, not one. Where it ended (the close). The best it ever got along the way. And the worst it got along the way. Suppose a coin finishes the hour up 5%: it may have climbed there smoothly, or it may have crashed 8% first and then recovered. Both paths produce the same close. “It went up 5%” reports only the ending, and hides the ride.

The best moment and the worst moment

MFE is the maximum favorable excursion: the best the move ever got before the window closed. MAE is the maximum adverse excursion: the deepest it went against you on the way. They are high-water and low-water marks, and neither is the close.

Why the pair matters more than either number

A setup can show a juicy MFE and still be untradeable, because its MAE says you had to sit through a brutal drawdown first. In the example above, the trader who “made 5%” first had to watch the position fall 8% without closing it, and a stop loss anywhere inside that drop would have taken the loss and missed the recovery entirely. Almost nobody holds through the low-water mark to collect the high-water mark. The pair tells you what holding the position actually felt like, minute by minute.

Reading the pair on a results row

On an EdgeDepth results row, read MFE and MAE together before you read the close. A wide gap between them means a violent path. And remember they are measured over every match in the scan, not a highlight reel: the same counting discipline applies here as everywhere else. The shape of all those paths together is a distribution, and it is worth learning to read.

See it live

Read MFE and MAE on a live condition page.