Maximum favourable excursion
How much profit did a position show at its best point before it was finally closed?
In plain words
Maximum favourable excursion is the best price a position ever reached after entry, measured as a gain from the entry price. It records how far in profit the trade went at its most favourable moment, regardless of where it ended.
Why it matters
It separates the opportunity a position offered from the result it produced. A trade that showed a large favourable move and still finished down suggests the exit, not the entry, decided the outcome. Reviewing it shows how much of a swing a given stop or profit target could plausibly have captured.
In a real week: ETH, week of 31 August 2020
For a long opened at the week's open of 428.94 on 2020-08-31, ETH's maximum favourable excursion was the high of 488.84, reached on Tuesday 2020-09-01 at 22:00 UTC, a gain of 13.96% from entry. The position then reversed: the week's low was 308.42 on Saturday 2020-09-05 at 18:00 UTC, and the close was 352.80, leaving the week's return at -17.75%.
A common mistake
Treating maximum favourable excursion as the trade's outcome. It measures only the best price seen along the way; the realised result depends on where the position was actually closed.