Tracking performance

Traders,

A somewhat peculiar question. Having quite a traditional schooling with regards to active portfolio management (that is, trading), concepts such as sharpe ratio's, information ratio's, etc are drilled into my system.

Even though I do not expect a lot of retail traders to use such performance metrics to measure their own performance, I am rather curious if there exists a kind of benchmark? A kind of (retail) currency traders index?

Kind regards,

Koen

I haven't heard of such a thing so I doubt it exists besides individuals such as yourself

Have you found anything? Each trader/firm/fund has its own metrics to calculate trading performance.

Retail traders are probably the ones that vary a lot.

To me, the most important are

Avg time on losing trades - the aim is to cut your losses short and this metric will tell you whether you are doing it.
Avg time on winning trades - the aim to let your winners run and having an avg time bigger than your avg loss time will prove that.
Sharpe ratio - uses the std dev of percentage of your gains and gives you good indication of your strategy success
Profit factor - shows whether you have proper risk management.
Total pnl % - the ultimate metric of performance
Absolute drawdown - for risk management and overall account management
Avg position size - if you are doing well, this number should keep going up

I use software to compute and monitor these metrics on a weekly basis.

Avg time on winning trades - the aim to let your winners run and having an avg time bigger than your avg loss time will prove that.

I've heard this adage time and time again. Let them run...to where? Let em run too long and its called "investing" :cheesy:

Seriously, let em run to where? How do we know when they have arrived?

Lol, I should have been more specific. Let it run until your profit target is hit.

tradethetrade said:

Lol, I should have been more specific. Let it run until your profit target is hit.

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What do you think about arbitrary profit targets such as "i need 3:1" regardless of whatever, "i'm holding out for 3:1" or i'm breaking even. or whatever pick any # 2:1 , 4:1

I think it is very important as we all know we should only enter a trade when we know what the loss and gain points are. The problem is that most traders don't have the discipline to follow either or don't know such rule exists, hence bad trading occurs. Having this parameter is essential as well as following it. A 3:1 ratio is excellent.

tradethetrade said:

I think it is very important as we all know we should only enter a trade when we know what the loss and gain points are. The problem is that most traders don't have the discipline to follow either or don't know such rule exists, hence bad trading occurs. Having this parameter is essential as well as following it. A 3:1 ratio is excellent.

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It won't change your trading results for sure, maybe only help you to extend time your lose your deposit. Unfortunately we all lose in the long run because of negative odds.

true - if only playing negative EDGE systems

gerryg said:

It won't change your trading results for sure, maybe only help you to extend time your lose your deposit. Unfortunately we all lose in the long run because of negative odds.

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Hi, Gerryg,

Your statement is quite broad - but sadly true for most retail traders b/c their lack of having and understanding the performance measures of positive edge trading plans means that they are probably playing a negative edge game.

However there have been several trading studies looking at random entries over 100s and 1000s of trades. In systems running Win/Loss at > (+2R)/(-1R) - these studies have shown net profitability with high (+R) entry vs exit criteria.

These types of studies also highlighted the importance of:

1. The bets are kept intentionally small between 0.2% to 0.5% per bet vs Bankroll Equity.
2. Trading multiple non-correlated trading plans.
3. Trading multiple non-correlated assets.

Of course - if running several campaigns ongoing simultaneously - the bet size is reduced even more so.

Btw - there are several consistent winning traders here in T2W - so if you are unable to profit annually in trading - then it does not necessarily extend/extrapolate to high performance experienced traders.

Thank you.

WklyOptions