Hedgemere Group
Maximum Adverse Excursion (MAE) measures how far a trade moved against the trader before it closed. It is a metric that reveals the real behavior of a strategy under pressure, beyond the final outcome of each trade.
Two trades can close with the same profit, but if one was deep in drawdown before recovering, the risk taken was higher. Knowing how to read this metric allows you to distinguish strategies that manage risk well from those that rely on exceptional recoveries.
What Maximum Adverse Excursion actually measures
MAE records the point of maximum floating loss within each trade. If a trade opened and went into negative territory at any point, that maximum loss level is its MAE. If it closed in profit, the MAE still reflects how far it fell before recovering.
This metric is usually expressed as a percentage of capital or in monetary units. A low MAE indicates that the strategy does not usually let trades stray far from the entry point. A high MAE suggests that the strategy tolerates wide excursions before closing.
MAE analysis allows you to identify patterns: if all winning trades go through a similar MAE, the system has stable behavior. If the MAE is erratic, it may indicate inconsistent management or dependence on extreme moves.
Why it matters in copy trading
When you copy a strategy, you do not only inherit the final results: you also assume the emotional journey and intermediate risk of each trade. A strategy with high MAE can be difficult to follow, even if it ends up being profitable in the long run.
If the average MAE is very high relative to the maximum historical drawdown, it means the strategy depends on recoveries. That is not necessarily negative, but you must be prepared to see your account in the red before trades close in profit.
MAE also allows you to compare strategies with similar risk profiles. A strategy with lower average MAE may offer a more stable experience, even if its final performance is comparable to another with wider excursions. For an investor who copies, that stability can be decisive.
How to interpret MAE alongside other data
MAE should be read in conjunction with the final outcome of each trade. A scatter plot relating MAE to the closing of each trade allows you to see whether winning trades usually go through controlled excursions or depend on wide recoveries.
If losing trades have a similar MAE to winning ones, it may mean that the stop loss is triggered late or that the strategy does not distinguish well between temporary and definitive losses. If winners have much lower MAE, the strategy is cutting losses effectively.
It is also worth reviewing the MAE in relation to the size of the trade. An excursion of the same amount has a different impact if it represents a small percentage of the account or if it compromises a significant part of the available capital.
What to look for in a strategy with controlled MAE
An institutional strategy tends to show bounded MAE: trades do not usually stray far from the entry point before closing. That does not mean there are never losses, but that management is designed to avoid unnecessary excursions.
In verified track records, you can review the distribution of MAE across the set of trades. If you see that most trades stay within a narrow excursion range, the strategy is predictable. If there are trades with MAE much higher than average, it is worth understanding in what context they occurred.
MAE also helps to adjust position size when copying. If you know the strategy can have excursions of a certain percentage, you can size your exposure so that excursion does not exceed your risk tolerance.
MAE and the difference between backtest and live trading
In a backtest, MAE can be calculated precisely tick by tick if high-resolution data is available. In live trading, MAE depends on how the broker's server records price movements and execution speed.
That is why, when reviewing a live trading track record, the MAE reflected is what the account actually experienced. It is not a simulation: it is the exact data of how far each trade moved against you before closing. That makes verified live MAE more reliable than that calculated on historical data.
Some copy trading services publish backtests with very controlled MAE, but in live trading the MAE increases due to slippage, latency, or execution during low liquidity hours. Comparing the backtest MAE with that of the verified track record allows you to identify those discrepancies.
How to check MAE in an audited track record
Independent verification platforms, such as those mentioned in this third-party audit analysis, allow access to the detail of each trade, including the maximum adverse excursion recorded.
When reviewing a track record, look for the individual trade analysis section. There you will usually find the MAE along with the final result, time in market, and other parameters of each trade. If the track record does not show MAE, it is a sign that the level of detail in the record is limited.
You can also calculate the average MAE of the set of trades and compare it with the maximum drawdown of the account. If the average MAE is a small fraction of the drawdown, it means the drawdown does not come from a single trade, but from the accumulation of several simultaneous open positions. That changes the interpretation of risk.
Practical application when copying strategies
Knowing the MAE allows you to anticipate the behavior of your account when copying. If the strategy has a known average MAE, you can estimate how far your balance can fall before trades close. That does not tell you whether you will win or lose, but it does prepare you for the journey.
If your risk tolerance does not allow you to see your account drop a certain percentage in floating loss, choose a strategy with historically low MAE. If you can assume wide excursions in exchange for another return profile, high MAE is not an obstacle, as long as it is documented and consistent.
MAE is also useful for deciding whether to maintain or close a copy in progress. If a trade has already exceeded the historical MAE of the strategy, it may be a sign that something has changed in the system's behavior. It is not an automatic rule, but it is data that deserves attention.
In our selection process, MAE is part of the consistency analysis. A strategy that keeps its MAE within stable ranges over time demonstrates discipline in execution. An MAE that increases without apparent reason may indicate drift in risk management.
Check the results for yourself
QuantBy is built exclusively on institutional traders, with results independently audited by Alpha Verification and confirmed live on Myfxbook — up to five years of track record you can review.
Frequently asked questions
What is the difference between MAE and drawdown?
Drawdown measures the drop in total account capital from its historical high. MAE measures how far each individual trade moved against you before closing. An account can have low drawdown with high MAE if trades are not open simultaneously.
Does a high MAE mean the strategy is bad?
Not necessarily. A high MAE can be part of the strategy's design, especially if it seeks to take advantage of reversals or wide moves. What matters is that the MAE is consistent and that the investor understands and accepts that risk profile.
How do I know if a strategy's MAE is acceptable for me?
Review the average and maximum MAE in the verified track record. Calculate what percentage of your capital that excursion would represent if you copied the strategy. If that percentage is within your risk tolerance, the MAE is acceptable for your profile.
Can I reduce the MAE when copying a strategy?
You cannot modify the MAE of the original strategy, but you can adjust your exposure. If you reduce position size, the excursion in absolute terms will be lower, although the percentage of each copied trade remains the same.