Maximum Adverse Excursion (MAE)
Maximum Adverse Excursion is the deepest unrealized loss a trade experienced between entry and exit — the worst drawdown of that single position. Traders analyze MAE across many historical trades to see how far winners typically go against them first, which is one evidence-based way to choose stop-loss distances.
What is the MAE formula?
For a long position, MAE is the entry price minus the lowest price reached while the trade was open, expressed as a percentage of entry; for a short it uses the highest price reached. If you buy at 1.00, the price dips to 0.97, then you exit at 1.02, the MAE is 3% even though the trade ended profitable. Like MFE, it is measured on raw price and ignores fees and slippage — it describes the path the trade took, not the accounting result.
How do traders use MAE to set stop losses?
Plot the MAE of many past trades, separating winners from losers. If most winning trades never went more than, say, some small adverse distance against entry while losing trades kept falling, a stop placed just beyond the typical winner's MAE cuts losers early without knocking out many eventual winners. This only works with a meaningful sample of real trades from the same strategy and comparable market conditions — a handful of examples proves nothing, and a distance calibrated in a calm market can be far too tight in a volatile one.
What is an MAE threshold?
An MAE threshold is a cutoff used in trade analysis: trades whose adverse excursion exceeded the threshold are examined as a group, for example to test the rule "trades that go more than X% against entry rarely recover." If the data supports it, the threshold can become a hard stop in the live rules. The danger is overfitting — choosing the threshold that happened to look best on one historical sample. A threshold should be validated on data that was not used to pick it before any real money relies on it.
Educational content — not financial advice. Trading digital assets carries substantial risk of loss. See the full Risk Disclosure.
Volume Catcher is an analytical tool, not financial advice. Trading digital assets involves substantial risk of loss. Past performance of signals does not guarantee future results. You are solely responsible for your execution decisions and for complying with the laws of your jurisdiction.