Traders keep track of variables and statistics to help them track their performance and identify areas for improvement.
Common metrics include items such as net profit, win percentage, payoff ratio per trade, and largest drawdown.
Now, I’d like to focus on some of the other forex performance metrics that tend to be overlooked but can provide critical insight into one’s trading:
1. Holding time
Knowing how long on average you hold your trades will tell you what trading techniques and styles you’re most comfortable with, and it will help you determine whether you’re a short-term forex trader or a long-term trader.
Scalpers tend to jump in and out of traders very quickly, while position traders may hold on to trades for months or even years!
Knowing which type of trader you are will help you make the proper adjustments to optimize your personal trading strategy.
2. Holding time of winners vs. holding time of losers
Now let’s go one level deeper (like in Inception!) and compare the holding time of winners versus the holding time of losers. Doing so will tell us whether or not we’re cutting trades too early or holding trades for too long.
As much as possible, we’d like to avoid holding on to losers and low-yielding trades as they tie up precious forex capital!
3. Winners and Losers broken down by session
Another time-based metric that you can take note of is WHEN you actually trade.
Breaking down your trades into which session you are trading could help you determine the best session for you to trade.
You might reside in Asia but realize that all your winning trades come during the London session. It might be advisable to clock in a few extra hours to squeeze those pips!
4. Winners/Losers broken down by market conditions
This metric will help determine whether you are recognizing the shifting market conditions and taking advantage of them.
You will see whether you’ve been able to take advantage of the recent trend by hopping in on retracements or if you’ve been stubborn, getting burned trying to pick tops and bottoms.
It could also reveal your optimal trading conditions. If the metric shows that you’ve been having more winners in ranging conditions, it may indicate that you prefer to play consolidation behavior with support and resistance levels.
5. Winners/Losers broken down by position size
Keeping track of how big your forex positions are could provide valuable insight as to how you react when position sizes change.
It could reveal whether or not you are taking advantage of strong trends by increasing your size, or doing a poor job of recognizing choppy markets and not scaling down.
These are just some of the many performance metrics that traders tend to overlook. In the end, though, it is up to YOU to decide which ones will be the most useful to you.
Keeping a trade journal is a tedious task but it must be done because it is the only path towards improvement.
Remember, the difference between an ordinary forex trader and an extraordinary one is that little EXTRA effort, done day-in and day-out!