Measuring MAE and MFE on an ICT Forex Trade

A losing long once travelled nine pips in your favour. A winning long first went six pips against you. Their final profit and loss entries hide the part of the path that matters when you are testing an ICT target or stop.

Maximum favourable excursion and maximum adverse excursion let you measure those paths. The work starts with a live interval bounded by entry and exit. Including an attractive print after the trade ended is one of the easiest ways to give a losing setup a fictional opportunity.

Excursions during the lifetime of a position

An excursion distribution can separate a poor destination hypothesis from an entry that regularly experiences deep adverse travel first. It can also show how much favourable room winners typically give back before an exit. A pair of extreme distances alone cannot reveal which came first. Preserve their timestamps whenever the decision depends on ordering.

MetaTrader testing report and statistics

Why the distinction matters for order flow

An entry candle’s low can predate the fill. An exit candle’s high can follow the exit. Full candle extremes can therefore overstate both adverse and favourable travel. When ordered ticks are unavailable, document an admissible range or exclude that boundary bar from a clearly labelled conservative measurement.

How to identify it on a chart

For a long, mark the bid available to close against the ask entry. For a short use closing asks against the bid entry. Clamp a purely unfavourable path’s MFE at zero under this convention. Store the fill timestamp, exit timestamp, highest and lowest eligible exit quotes, and the original cash or pip risk.

A paper long enters at 1.08647, stops at 1.08557 and targets 1.08872. Risk is 9.0 pips, potential reward 22.5 and risk:reward 1:2.50. Before a discretionary exit the bid ranges from 1.08611 to 1.08782. MAE is 3.6 pips or 0.40R. MFE is 13.5 pips or 1.50R. A later high at the target after exit cannot increase this trade’s MFE.

Reconstruct the open interval of a long trade

This practice ticket buys at 1.08376, with a bid stop at 1.08296 and a bid target at 1.08576. Initial risk is 8.0 pips and reward is 20.0, giving planned gross risk:reward of 1:2.50. In these notes use only bids observed while the position is open.

Before entry. Including it would manufacture an adverse excursion larger than the original stop. Save the timestamp rather than assuming every low in the entry candle occurred after the order was active.

Early adverse move. This can help diagnose the depth of the return against the local gap entry. It also tells you that any tighter alternative stop at or above that level requires its own exit simulation.

Favourable expansion. A management rule activating at one risk unit could have become eligible on this path. Establish its exact timestamp and subsequent prices before booking a scratch or saved loss.

Actual exit. The difference between peak favourable movement and the exit is 4.8 pips. This is a giveback description. It cannot establish an attainable alternative exit at the exact historical peak.

After exit. The original target eventually traded but the position had already ended. A target-hold alternative needs to replay the entire continuation, including any earlier adverse prices and its planned expiry.

How would a partial close affect the excursion record?

Keep price excursion for the original setup and compute money excursion for remaining volume separately. A half-sized runner has less cash sensitivity per pip even when the chart travels the same distance.

How to trade the setup in a paper session

Compare management variants on the same ordered path. A new stop can finish the alternative trade sooner, changing its measurement interval and the subsequent available excursion. Keep original-policy excursions for diagnosis and rerun the alternative with its own exit time before computing its realised result.

The charts use constructed five-minute bid candles. The two trade excursions exercises below share a bracket order as a comparison point. Each shows when an ICT displacement clears a local swing, when a fair value gap becomes measurable and which later quote can fill it. All sample spreads, costs, outcomes and sizes belong to the hypothetical exercise.

The entry and exit candles need special treatment

Inside a five-minute candle the market can visit both extremes before your order becomes active, or one before and one after. The same problem reappears on the exit bar. Taking the maximum high and minimum low of all bars touched by the trade is quick, but it can include prices your position never experienced. The error is especially large on short trades lasting only one or two bars.

An ordered tick record lets you cut the series at the actual fill and exit. Where that record is unavailable, calculate definite extrema from the fully enclosed bars, then calculate wider possible bounds using the boundary bars. Keep the interval as uncertainty. Replacing it with a single exact-looking number may bias a stop analysis toward wider stops or a target analysis toward larger profits.

Plot favourable and adverse excursion together with time to first reach each milestone. A group of trades can all reach one risk unit of favourable movement and still have different management opportunities. In one group the favourable move happens before the deepest adverse move. In another it happens only after an alternative tight stop would already have ended the trade. Two extreme magnitudes alone cannot reconstruct that ordering.

To compare trading methods, preserve each setup’s original risk denominator. A new entry or protective level can change the money value of a pip and the size of one R. A seemingly larger MFE in risk units may stem from a smaller stop distance instead of a longer price run. Report pips and original risk units together so that the reader can see both the market movement and its relation to the executed trade.

EUR/USD worked example

Measure movement only during the live position

The local long uses 1.10404 as entry, 1.10309 for the protective order and 1.10629 for the target. Its original risk unit is 9.5 pips. Start the excursion ledger when the order can fill in the 12:45 candle. Prices during the earlier raid of 1.10348 belong to the signal history and cannot enlarge this position’s adverse excursion.

Using the ordered practice quotes and clipping movement at the position’s exit, maximum favourable travel is 12.4 pips (1.31R). Maximum adverse travel is 9.5 pips (1.00R). The model uses bid for the closing side and assumes execution at the touched bracket price. Those details matter most on the exit bar, whose later extremes no longer belong to the position.

Read the entry from left to right

Begin with the marked sell-side reference at 1.10348. The five-minute candle beginning 12:25 extends to 1.10322. At its close there is evidence of a visit and a new local low. The price that will become the upper edge of the execution gap is still in the future. A reader practising this live can put an alert on the opposing pivot at 1.10447 and leave the order ticket empty until the remaining conditions arrive.

At the close of the 12:35 candle the bid stands at 1.10469. Compare that with the earlier pivot. A completed shift now supports an upward delivery hypothesis, but the proposed three-candle imbalance still requires its third candle. The first candle’s high is 1.10393. The third candle’s eventual low is 1.10415. Their separation is 2.2 pips and their midpoint is 1.10404. The earliest next-bar activation on this tape is 12:45.

The order buys on the ask and the chart shows bids. With spread fixed at 0.7 pip, an ask of 1.10404 corresponds to bid 1.10397. The returning bid reaches 1.10377 and its matching ask reaches 1.10384. The workbook assumes continuous movement between displayed quote observations, sufficient available size and an execution at the requested limit. The same logic applied to a real broker order would still need the deal record to establish an actual fill.

Translate the chart into a position size

For a worked cash conversion, suppose the USD paper account assigns this candidate a maximum planned loss of $13.60. A standard lot of 100,000 base units on this USD-quoted pair changes by $10 for a one-pip move. One standard lot at the 9.5-pip stop distance plus 0.4 pip of estimated round-trip fees and other friction therefore exposes $99.00 at the modelled stop fill. The bid/ask condition already accounts for the stated spread.

Dividing the cash cap by that one-lot loss gives 0.1374 lots before volume rounding. With a permitted increment of one hundredth, rounding down gives 0.13 lot and $12.87 of planned downside. Check the conversion in reverse by multiplying size by loss per lot. A smaller order can make a wide structural stop affordable. It cannot supply missing room between entry and the intended liquidity destination, and a stop filled through its requested price can still exceed the estimate.

Reclassify one changed condition

Replace the original protective instruction with an exit halfway to the stop. That would define a different trade lifetime. Its gross risk:reward to the original objective would be approximately 1:4.74 before tick rounding. Recompute its first exit and excursions on the ordered path instead of reusing the original extremes.

GBP/USD worked example

Measure movement only during the live position

The local short uses 1.28740 as entry, 1.28846 for the protective order and 1.28454 for the target. Its original risk unit is 10.6 pips. Start the excursion ledger when the order can fill in the 12:50 candle. Prices during the earlier raid of 1.28803 belong to the signal history and cannot enlarge this position’s adverse excursion.

Using the ordered practice quotes and clipping movement at the position’s exit, maximum favourable travel is 28.6 pips (2.70R). Maximum adverse travel is 3.9 pips (0.37R). The model uses ask for the closing side and assumes execution at the touched bracket price. Those details matter most on the exit bar, whose later extremes no longer belong to the position.

Audit the sell order from the dealing side

The first local buy-side reference at 1.28803 has a different job from the swing whose closing break confirms the bearish move. Compare the observed high of 1.28832 with that first price, then inspect the later close at 1.28668 relative to the pivot at 1.28692. One comparison describes location and the other supplies direction. Combining them into a single retrospective arrow would hide the point at which the trader actually gained the new information.

A bearish fair value gap forms when the later high remains below the earlier low in the three-candle sequence. Here the low of the candle starting 12:35 is 1.28753. The high of the candle starting 12:45 is 1.28727. The middle of their 2.6-pip interval is 1.28740. The sell limit becomes available once the second boundary is known. On the returning candle the maximum bid is 1.28770, high enough for the paper limit under the stated fill convention.

A sell opens on the bid, but the position ends by buying on the ask. For an ask stop at 1.28846 the bid needs to reach only 1.28837 with the assumed 0.9-pip spread. An ask target at 1.28454 requires a bid at or below 1.28445. Marking the two bid equivalents before scoring the last candle prevents a visually attractive wick from becoming a profit that the executable side never offered.

Reconcile the terminal candle

The first deciding bar opens at 13:10 GMT. Its bid ranges from 1.28414 to 1.28618. Adding the model spread gives an ask range from 1.28423 to 1.28627. Follow the tape from the fill and stop at the first executable exit. Here the original bracket reaches its target before the other terminal price. The closing body can finish away from that exit without changing the realised trade.

As a sensitivity check, leave the chosen fill sequence intact and increase extra round-trip costs by 0.5 pip. Possible net reward becomes 27.6 pips and possible downside becomes 11.6 pips, giving risk:reward of 1:2.38. This calculation isolates a change in charges. A different spread can alter whether the original sell or its buy-to-close orders were ever executable, which calls for a new quote-by-quote replay.

Reclassify one changed condition

Replace the original protective instruction with an exit halfway to the stop. That would define a different trade lifetime. Its gross risk:reward to the original objective would be approximately 1:5.40 before tick rounding. Recompute its first exit and excursions on the ordered path instead of reusing the original extremes.

Compare favourable excursion before the exit with later travel

Take five independent practice records and apply two predeclared policies. A records a one-R favourable quote before the actual exit. B records it anywhere in a longer observation window that includes the trade. In this exercise “yes” means the named condition occurs within the stated opportunity. A row can satisfy both conditions, satisfy one, fail both, or leave a condition unresolved. Score the evidence supplied before imagining how the rest of the chart might behave.

Work through the disagreements

One R reached while the position is still open. This can support a management hypothesis if the activation and later return are chronologically ordered.

One R reached only after an early exit. The longer forecast succeeds but the original trade never had that live excursion.

The wider observation window never reaches one R. Neither question can claim the milestone, regardless of smaller favourable moves.

The target trades during the position and later reverses. Record the actual terminal exit as well as the peak. A later reversal is irrelevant after the position closes.

The wider window reaches one R but the exact fill or exit time is missing. The broad price path is known. Membership in the live trade interval needs the missing dealing timestamps.

In these constructed observations, A gives 2 confirmed yes, 2 confirmed no and 1 unresolved. B gives 4 confirmed yes, 1 confirmed no and 0 unresolved. Among the 4 rows settled for both rules, they agree on 3 classifications. Agreement here concerns qualification under the stated definitions. No return series has been supplied for these five records, so the counts cannot estimate the profitability of either policy.

Resolve the missing evidence

Retrieve the actual fills and the executable close-side quotes at the entry and exit boundaries. Until that information is available, the possible number of positive A classifications is 2 to 3 out of five. For B the corresponding count is 4. Preserving bounds stops an unresolved record from entering the journal as a known failure merely because obtaining the source data was inconvenient.

Applying the worksheet on a new session

Resolve the order of events before comparing exits

Draw a line from order acceptance to final execution and put every management event on it. A protective exit, partial close, stop revision and time deadline can all depend on which quote arrives first. A completed five-minute candle can contain the prices needed for conflicting outcomes without revealing their order. The higher the management frequency, the more consequential that limitation becomes.

For a replay that supplies ordered quotes, stop each alternative branch as soon as its applicable terminal condition occurs. Prices after that time still belong to the market history. They can inform a counterfactual strategy that remains open, but cannot alter the realised result on the branch that closed. This also limits how far favourable and adverse excursions may be measured for each branch.

If you have only OHLC data, test at least the admissible extremes of ordering when they matter. Compute one outcome under the favourable ordering and another under the adverse ordering, or mark the trade unresolved. Reporting the range of plausible results is more informative than choosing the sequence that makes an intervention look effective. Check the rule on episodes where alternative chronologies give identical outcomes as a control.

Reconcile gross chart movement with the actual deal

A pip of favourable movement on the chart has a money value only after direction, contract size, account currency and volume are known. For the two USD-quoted paper pairs here, a standard one-hundred-thousand-unit lot changes by ten dollars per pip. A smaller position scales proportionately. Check the actual symbol specifications whenever you move the calculation to another contract or a different account denomination.

Execution side is part of the price path. Longs open by buying and close by selling. Shorts do the reverse. If the simulation already waits for the correct bid or ask and measures between actual deal prices, the spread is already represented. Additional commission, financing or assumed adverse slippage should be labelled by what it covers. Charging a full spread again after using both correct sides can understate the result.

A trade can also have a planned and a realised risk amount. The protective trigger states an instruction, while a faster market may produce a worse deal. Retain the original planned exposure as the denominator for risk-unit reporting, and record the actual cash loss separately. That preserves the evidence of excess loss instead of hiding it by increasing the denominator after the event.

Check a proposed rule on dates it never helped select

Use an early block of dates for developing a measurement and a later block for evaluating the frozen version. Record the date of each change to the signal, spread filter, stop rule or target. A chart that helped you choose a threshold is already part of model development even when no order was ever placed on it. Keep the distinction visible when presenting a result as new evidence.

Review dependence as well as the number of tickets. Several exposures to the same US dollar event can generate similar wins or losses in a single hour. Summarise by week or session as a check on a trade-level average. Preserve extraordinary days in the actual ledger and separately show what happens to the descriptive statistic without one influential observation. That sensitivity exercise is different from editing the official return after seeing it.

For a disagreement between two candidate policies, request the input that would settle it before opening the future price path. If the disagreement concerns a missing source quote, a later winner cannot supply that quote. If both readers reproduce the same inputs and still classify the case differently, tighten the decision wording and record a new version. Apply that revision to future evidence, then compare it fairly on an agreed research sample.

A favourable move that no alternative order could capture

Take a trade whose measured favourable excursion exceeds the realised gain. Locate the exact time of the peak, then ask which predeclared exit rule could have acted before the quote moved away. A historical maximum is an upper bound on what an exit at that stage might capture under the assumed data. It is not itself an executable policy.

Repeat the test on a trade that first suffered its deepest adverse movement and only later reached the favourable peak. A tighter hypothetical stop might eliminate the very path from which the impressive excursion was measured. Record the first event under the alternative risk rule, then truncate its own excursion series there. The contrast between a descriptive peak and a reachable managed result is often more informative than a scatter plot of highs and lows without timestamps.

Frequently asked questions

Continue the chart exercise with the school’s guides to the London Kill Zone and the Judas Swing for session context. Use market structure shifts to locate the confirmation, fair value gaps to mark the return interval, and order blocks to relate the smaller trade to its larger price area.