MFE stands for Maximum Favorable Excursion, the maximum profit a trade reached at its best point before it was closed. For a long position, it is the highest price hit during the trade; for a short, the lowest.
If you enter at $50 and the price peaks at $60 before you exit at $55, your MFE was $10 but you only captured $5, leaving profit on the table.
MFE is the favorable counterpart to MAE and is invaluable for refining exit strategy and profit targets. By tracking MFE across many trades, you learn how far price typically runs in your favor, helping you set realistic targets or trailing stops. A large gap between MFE and realized profit signals you are exiting winners too early.