Maximum Adverse Excursion(MAE) is the maximum loss of a trade during its complete time period. It can be a valuable tool for stop placement. If your winners have low maximum adverse excursion then moving your contracting your stops can dramatically increase your results.

Example

I have an intraday daytrading breakout system in a Sector index. It is profitable system that has these statistics below with a current stop of 1.00.

• Profit Factor 1.52
• Win % 52
• Average Win 91.26
• Average Loss 65.65

Here is a screenshot of the Maximum Adverse Excursion graph from Tradestation.

The red triangles are losing trades. The green triangles are winning trades. The X-axis is Drawdown and the Y axis is Profit.

A large cluster of green trades to the left is a great sign. This indicates that the winning trades don’t go against you from your entry point. The trick is to find the dividing line that separates the majority of the winning trades to the left of your line. I selected 33 cents. I then reran the strategy and these are the updated numbers

• • Profit Factor 2.59
  • Win % 46
  • Average Win 94.81
  • Average Loss 31

Here is the new Maximum Adverse Excursion Graph

The profit factor jumped because I was able to raise the average win and dramatically lower the average loss while lowering the win percentage modestly. That is the goal. If you have any questions drop me a line.