It is very important to measure your forex trading performance every now and then.
There are many reasons why you should measure your forex trading performance:
- measuring your forex trading track record will help you make better decisions in the future;
- measuring your performance will give you a better idea of where to focus for improvement and how to leverage your time and money more effectively;
- measuring yourself against other traders can help improve upon what makes them successful.
Here are a couple of strategies that you can use to determine whether you are a profitable forex trader:
1. Establish a Forex Trading Benchmark
A good benchmark will help you identify areas where you can improve, and it can also serve as motivation for keeping your goals in mind when going out to trade.
2. Number of Winning Trades and Losing Trades
Compare the number of winning trades and losing trades to see if you are profitable or not, so that you can make changes in your strategy if necessary. If you have many losing trades, then it’s time to change something.
3. Use Risk and Reward (R/R) to Measure Forex Trading Performance
Risk and reward is the ratio of the potential profit to the potential loss of your trades. It can be calculated in various ways, such as:
- Risk/Reward = (Profit Potential / Loss Potential) * 100%
- R/R = Profit Potential / Loss Potential
- R/R = P(Profit) / L(Loss)
A high R/R means that you are making good trades and getting lots of profits.
4. Total time you spend on each winning trade or losing trade
You should not stay too long on a trade. You want to open a trade, make your profits and get out as soon as possible.
5. Evaluate the Consistency of Your Forex Trading Performance
You need consistency so that when one month goes well, or one week went well (or both), then the next week or month won’t seem out of place at all.
6. Determine Your Account Growth Rate in Relation to Your Benchmark
You need to find out how many trades you made during the first 90 days of trading and compare it with the number of trades made by other traders. The more trades other traders make, the lower their average loss per trade will be. This can help you see if there is something wrong with your strategy.
7. Time Of Your Winning Versus Losing Trades
The best time to trade is different for everyone, which is why you should find what works for you.
8. Exploit Forex Stops and Targets to Measure Performance
Stop loss and take profit are two of the most important technical indicators you can use to measure your forex trading performance. They show you when to close a position, and they help keep your losses under control.
9. Calculate Your Forex Profit Factor
The Profit Factor is the ratio of your profit to your risk. It’s a measure of your ability to make money in an environment of uncertainty, and it can help you determine whether or not you’re consistently profitable.
Profit Factor = Net Profit / risked amount.
10. Understand the difference between return on risk and return on capital
Return on risk is the ratio of profit to loss, while return on capital is the ratio of profit to risk.
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