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 part of your trading system, plans, or processes are keeping you from running like a fine 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.
- Net Profit: This is your total gain minus losses and expenses. These expenses include 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: That's the total number of wins divided by the total number of trades. What percent of the time do you win trades?
- Loss percentage: That's the total number of losses divided by the total number of trades. What percent of the time do you lose trades?
- 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: 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 trade gain: This is computed by dividing the total gain from all your winning trades divided by the number of winning trades.
- Average trade loss: That's your total loss from all your losing trades divided by the total number of losing trades.
- Payoff ratio per trade: That's your average winning trade minus your average losing trade.
- Average holding time: Divide your total holding time for all your trades by the number of trades.
- P/L of long/short only 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 draw down, 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.
- Largest trading account percent of drawdown: This is the amount your account equity has gone down after your longest string of losses.
- Tracking feelings and mistakes. How well you execute your trading plans can be quantified, as well as your mental state when you trade. 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.
- Expectancy: 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.
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!
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