Maximum Adverse Excursion (MAE)

Maximum Adverse Excursion (MAE) is the worst unrealized loss a trade reached between the moment you opened it and the moment you closed it. It is the deepest point of pain, measured bar by bar, regardless of how the trade eventually settled. Think of it as the heat the position put you through before the outcome was known.

What MAE actually measures

MAE measures the largest drawdown a trade saw while it was open, scanned tick by tick or bar by bar. In the Tradeways journal, we compute it from 1-second OHLCV bars sourced from Databento, so the number reflects what actually happened on the tape, not what your broker happened to print at the close.

The word "unrealized" is the important part. MAE is the loss you sat through, not the loss you booked. A trade that closes green can still have an MAE that should have stopped you out twice. That gap between what you lived and what you logged is where most of the useful information lives. Its mirror image, Maximum Favorable Excursion, tracks the best unrealized profit the same way.

What MAE tells you on winners vs losers

On a losing trade, MAE is roughly your realized loss. The trade went against you, kept going, and you closed it. Nothing to learn there beyond confirming the stop did its job.

The interesting case is winners with large MAE. A trade that went 1.8R against you before turning around and printing a 1.2R win is not a clean victory. It is a near-miss dressed up as a win. The market did not respect your level. The structure was wrong, or your timing was early, and the only reason the trade is in the green column is that price came back. Count those separately when you review.

MAE and stop placement

Your MAE distribution is the most honest test of whether your stops mean anything. If MAE on most trades clusters somewhere around your stop distance, the stop is doing real work, it is the actual exit line and the data reflects it.

If MAE on most winners sits at 80% or more of your stop distance, you are surviving by reversion. The trades are not structurally sound, they are statistically lucky, and the next time price keeps going you will eat the full stop with nothing to show for it. The same logic applies in reverse to Maximum Continuation Excursion on exits: if you cut early on every trade, you never let MAE prove itself wrong.

MAE vs risk of ruin

MAE is the trade-level view of risk. Risk of ruin is the portfolio-level view. They feed each other. A wide MAE distribution means individual trades take more heat than your risk budget assumes, which compresses the number of consecutive losses you can absorb. Tighten MAE through better entries or honest stops, and the risk-of-ruin math relaxes by the same factor.

What to do with it

Log MAE on every trade. The journal does this automatically, but the discipline is to look at it.

Then bucket trades by the MAE-to-stop ratio: 0 to 0.3 is clean, 0.3 to 0.7 is normal, above 0.7 is the lucky-winner zone. Flag every trade in that top bucket and re-open the entry. Was the level wrong? Was the timing early? Did the news event you ignored move the tape? You are looking for a repeatable reason, not an excuse.

Over a month of trades, the shape of that distribution tells you whether your edge is real. A clean strategy concentrates MAE in the bottom buckets. A reversion-dependent strategy spreads it across the top, and that is the strategy that will hurt you when the market stops reverting. For the full picture across the three excursion metrics, see the MFE, MAE, and MCE overview.