Every decent trader has their own methods to their trading strategy. While it is important to monitor your account growth or loss, good traders will utilize extra stats in order to evaluate their success or failures.
Trading should be considered a business, that is either generating you profit or operating at a loss. Here are several key statistics that traders should make use of in order to determine their trading performances.
Otherwise known as R:R, this can be simply explained as how much a trader is risking on a trade while determining how much a trader is looking to make on the trade. An ideal trade R:R would be 3:1, otherwise explained as a trade that could generate 3x profit on the capital risked. Essentially a traders R:R needs to be higher to mitigate the risk, as a single win with a high R:R would cover several losses if the same capital was used on each trade.
While simply looking at your account balance is a good way to determine if you are winning or not, identifying the win percentage will garner valuable insight to a trader’s strategy.
A successful trader that trades high R:R setups but only has a win percentage of 40% could still be making profit. While a trader who closes their winning trades early and has a winning percentage of 70% but lets losing trades run longer, could easily be in the negative.
It’s important to understand what your winning percentage is and how you can plan your trades better to grow that winning percentage and maximize profits. Be patient with your winners and impatient with your losers.
A trader that can evaluate their mistakes will only learn and grow from their past failures. It is vital to look back at the mistakes made and identify what did not work, just as a trader looks at what works when they are successful.
Not every trade setup will work, not every account will be profitable. It is important to understand why. Trading mistakes can vary from take profit levels, large stop loss levels, incorrect trade sizes and revenge trading to name a few mistakes.
The more you know about your trading strategy and results, the more dialled in you will be. Identify your trading plan, implement your strategy and evaluate your results constantly, if it is not working then start the process again. However, always be sure to monitor your statistics to attain a better understanding of your trading.
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