Trading Performance Metrics. statistics, mae mfe time of position opening

Summary of Trading Performance Metrics

This analysis focuses on two key metrics to optimize trading strategy and understand psychological biases: Maximum Adverse Excursion (MAE) and "Money Left on the Table" (a custom form of MFE).

1. Maximum Adverse Excursion (MAE)

   • What it is: The largest temporary loss a trade experiences before ultimately becoming profitable.
   • Purpose: To set data-driven stop-loss levels. By analyzing MAE percentiles, you can determine a stop-loss value that survives a specific percentage of normal drawdowns.
   • Example: If 90% of your trades have an MAE of less than 20 pips, a stop-loss set slightly above 20 pips would only be triggered by the worst 10% of trades, while allowing the other 90% a chance to recover.

2. "Money Left on the Table" (Profit Optimization)

   • What it is: After a profitable trade is closed, this metric measures how much further the price continued in the favorable direction before reversing back to the entry price.
   • Purpose: To identify if profits are being taken too early.
   • Analysis: It tracks the size of this "peak overshoot" in pips and currency, helping to create a safety margin for take-profit targets.

3. Psychological Analysis

   • Method: Compare the average time it takes for winning trades to close versus losing trades.
   • Interpretation: If profitable trades close much faster than losing ones, it indicates a common psychological bias: cutting winners short due to fear, while letting losers run based on hope.