What does Maximum Favourable Excursions (MFE) track?

Maximum Favourable Excursions (MFE) specifically tracks the maximum potential profit that is available during the life of a trade before it is closed. This metric provides insight into the best point that a trade could have reached in terms of profit, regardless of whether or not the position was actually closed at that point. Understanding MFE can help traders assess how well a trade performed at its peak and evaluate their exit strategies accordingly.

By analyzing MFE, traders can refine their risk management techniques and improve their decision-making process, focusing on capturing more of the potential profit from winning trades. This contrasts with other metrics that either measure losses, the overall profitability of a series of trades, or the drawdown, which does not reflect the ideal performance of an individual trade.