Learning how to measure your trading performance is just as important as learning how to trade the market. It helps you interpret business results and risks and avoid costly mistakes. Most marketers don’t know how to translate their performance into useful metrics, which hurts their profit margin.
Metrics are more than just an interesting statistic if you know what your metric is. When you trade, you should measure everything that can be measured in order to create and manage your trading strategy, monitor trading results and identify potential problems.
Tracking Your Trading Performance
There are three basic performance indicators that every trader should track when evaluating their own stock trade account performance. These metrics, including Rate-of-Return (RoR), DrawDown and Sharpe Ratios, can be overwhelming, especially for novice traders. Focusing on metrics like Win Rate and absolute ROR can be misleading for newbies. However, there are three important performance indicators that can help you achieve a positive outcome in your trading.
Profit factors are determined on a store-by-store basis using closed-store data. A graph showing the ROR of each trade is created by comparing it to the total capital. Your PF is good if it is above 1.5, excellent if it is above 2.5 and world class if it is above 3.5. From the last “X” number of years to your entire trading career, multiple time frames can be used to plot and measure your profit factor.
Gain-to-Pain Ratio GtPR can be calculated using either store-by-store ROR results or monthly ROR. Similar to the Profit Factor, the numerator of the profit-to-pain ratio is the sum of both trades or months depending on the ROR monthly or individual trades used.
The amount of pain required to achieve a certain level of profitability is measured by GtPR. A good GtPR should be maintained for the last three to five years. GtPR above 2.0 is excellent, above 3.0 is world class and above 1.0 is good.
Closed Trade NAV Curve:
Pay attention to this curve if your primary goal is to cut losses quickly. A curve that includes open action and is plotted on a daily, weekly or monthly basis shows more volatility.
Estimate your KPI
Since the exchange market is very unpredictable, it is important to monitor KPIs. Your focus should be on low buys and high sells to keep track of your trading performance and profit from your trade.
To improve your business results, keep an eye on the following aspects:
Your trading profit is equal to your trading time. Your trade is not yet profitable because of your bad timing. Watch your profits soar once you identify the ideal trading period for your currency pair.
Some currency pairs perform poorly in the market. Not all currencies perform efficiently under equal market conditions. You need to be aware of which pairs are more profitable than others. You can get the most out of your trading performance by combining a good pair with the right timing.
This will help you better understand your trading signals and strategy as well as how strong the trends are.
Trading Strategy Performance
Successful traders rely on trading strategies that can expand trading opportunities in different markets and market conditions. The adaptability of your trading system may not always be effective due to unpredictable market conditions.
How to evaluate your trading strategy is as follows:
Before you decide, weigh the pros and cons. The first step in evaluating your trading strategy and performance is to determine if you should change your pattern. Collect enough sample data and evaluate your results. Before you decide to change your strategy, consider your performance and be patient with it.
A flexible trading system is essential. It must take into account all favorable and unfavorable market conditions. Being a system hopper is a bad thing. If you change systems, you won’t have time to plan and use your strategy effectively.
Change or replace?
You may need to adjust your trading performance if it no longer matches your previous data. However, you need to decide how big of a change it will be, whether it will be a minor tweak, a recalibration, or a total overhaul. Check if your indicator is faulty if it no longer serves its purpose.
Deploying a system is not a simple process and can be extremely challenging. Whether you are editing or refurbishing. The key to creating an effective strategy is to identify the strengths and weaknesses of each system component, as well as the potentials and effects of each action.
Evaluate and Consider
It is acceptable to adjust your trading strategy to achieve successful trading performance; however, regular assessments are also necessary. The market is also imperfect, just like the world. Objectively monitoring and evaluating your new strategy is the only way to evaluate its performance.
Strategy planning also requires a design-like mindset. When the market moves, your approach and style should follow suit. Adapting to these changes is easier when you think like a designer.
Final Thoughts on Your Trading Performance
Tracking your trading performance can be difficult because there are many factors to consider. Sign up for a free trial of trader2B if you want an easier method to track your performance.