While your bottom line (total profit or loss) can easily tell you your overall trading performance, keeping statistics is a great way to find out what parts of your trading system are keeping you from running like a finely tuned race car instead of a junkyard clunker.
Your “performance stats” help you determine what’s working, what’s not working, and what to improve on.Here are some of the statistics to keep, at a minimum, to track your system vitals.
Your net profit is your total gain minus losses and expenses. These expenses include the cost of equipment, commissions, and other costs. Basically, this is how much your account is up or down at any given time minus to costs to trade.
Win percentage is the total number of wins divided by the total number of trades. What percent of the time do you win trades?
Loss percentage is the total number of losses divided by the total number of trades. What percent of the time do you lose trades?
Largest Winning Trade
Your largest winning trade will be removed from your “average win” calculation.This is not necessary to do, but if you do have an abnormally large win in relation to your other wins, then taking it out will provide a more accurate look and expectations to your stats.
Largest Losing Trade
Your largest losing trade will be removed from your “average loss” calculation.
This is not necessary to do, but if you do have an abnormally large loss in relation to your other losses, then taking it out will provide a more accurate look and expectations to your stats.
Average Winning Trade
The average gain per winning trade is computed by dividing the total gain from all your winning trades divided by the number of winning trades.
Average Losing Trade
The average loss per losing trade is your total loss from all your losing trades divided by the total number of losing trades.
Payoff Ratio per Trade
The payoff ratio per trade is your average winning trade minus your average losing trade.
Average Holding Time per Trade
The average holding time per trade is calculated by dividing your total holding time for all your trades by the number of trades.
P/L of Long Trades vs P/L of Short Trades
This stat helps determine what types of trades or trading environments you perform well in.
Largest # of Consecutive Losses
This stat helps in determining your max drawdown, or the worse possible scenario you have experienced so far.
Average # of Consecutive Losses
This stat helps in determining your average drawdown and controlling your potential max risk.
The maximum drawdown is the worst period of “peak to valley’” performance of your trading system.
In simple terms, expectancy is the average amount you can expect to win (or lose) per trade.
This can be computed by multiplying the loss percentage by the average loss and subtracting it from the win percentage times the average win. This stat helps you determine the correct position size and how profitable your trading method is.
Tracking Feelings and Mistakes
Your mental state can’t exactly be tracked as a “statistic” but you should record it nonetheless.
Keeping track of how you feel will help you avoid trading during those frustrating times–like when you wake up right after a news event (that you forgot about), and it pushes the markets fast, so you try to chase it.
But then your computer crashes, you lose power, and your dog goes running out of the house into oncoming traffic.
By the time you get back online you see the market has moved 100 pips in the direction you wanted to buy. Don’t you hate it when that happens?
You’re probably not in a good mood by then, so trading for the rest of the day may be a bad idea.
Ideally, you should be keeping track of these statistics so that you can compare and analyze your performance over a set period of time.For example, at the end of the year, Huck releases her year-end trading review.
After going through her trades, she could see that she was actually unknowingly taking trades against the trend!
Knowing this, she can adjust her trading so that she can avoid going against the trend and this will hopefully lead to better trading performance.
The goal of collecting and calculating these stats should be to find ways to maximize your expectancy (pips or dollars gained per trade), set the correct position size per trade, and determine the trading conditions best suited for YOU!