📉 Maximum Adverse Excursion (MAE) — The Key to Better Stop Placement
🎯 The Lesson
Most traders don’t know how far a trade typically goes against them before turning profitable.
That distance is called MAE — Maximum Adverse Excursion.
If your stop is inside your MAE zone, you will get stopped out even when your idea is correct.
Understanding MAE turns stop-loss placement into a science, not a guess.
⚙️ Step 1: What Is MAE?
MAE is the maximum drawdown a trade experiences from entry before moving into profit.
Example:
You buy EURUSD at 1.1000
Price drops to 1.0988 (–12 pips)
Then rises to 1.1030
MAE = 12 pips
If your stop was 10 pips, you got removed from a winning trade.
📊 Step 2: Calculate Your Average MAE per Setup
Go through 20–30 past trades of the same strategy.
Note the maximum drawdown each trade experienced.
Example MAEs for a breakout strategy:
12, 15, 17, 14, 11, 18, 16, 20, 13, 15…
Average = 15–17 pips
This means your stop should NEVER be smaller than 17–20 pips for this setup —
otherwise, you’re guaranteed to be wrong early.
🔢 Step 3: MAE + ATR = The Perfect Stop Formula
Combine MAE with ATR for better accuracy:
Stop Loss = MAE + (ATR × 0.5)
Example:
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Avg MAE = 15 pips
-
ATR = 10 pips
Stop = 15 + 5 = 20 pips
This creates a stop loss that respects both your strategy’s behavior and market volatility.
📉 Step 4: How MAE Protects You From “Fakeouts”
Most losses traders take are due to:
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Liquidity sweeps
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Early spikes
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Small pullbacks
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Spread fluctuations
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Structural retests
These movements are captured inside your MAE history.
If your stop avoids the MAE zone, you avoid 70–80% of unnecessary losses.
🧮 Step 5: Adjust Lot Size Based on MAE, Not Feelings
If your MAE tells you a 20–25 pip stop is logical:
Reduce lot size accordingly.
Example:
Risk: $50 per trade
Stop: 25 pips
Lot = $50 ÷ 25 = 0.20 lot
Never shrink the stop to increase lot size.
Increase knowledge → maintain stop → reduce size.
🚀 Takeaway
MAE is the invisible enemy of most traders.
You’re not losing because your strategy is wrong —
you’re losing because your stops are inside the natural movement of your system.
Once you measure MAE and place stops beyond it, your accuracy skyrockets and stop-outs drop dramatically.
This is how professionals engineer consistency.
📢 Join my MQL5 channel for more trading & risk-management insights:
👉 https://www.mql5.com/en/channels/issam_kassas
