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Keeping Forex Trading Simple

  #4 (permalink)

London England
Posts: 7 since Dec 2014

Trading Performance Metrics

Messing around with trading performance metrics is a great way to use all that spare time in between trading setup evaluation opportunities or more often, when you’ve used up all your premium grade energy and can’t face making another trading decision. It’s also in my view a total waste of time.

Trading is a process of adaptation to changing market dynamics. The way you trade, how you trade even what you trade will by necessity change over time. It has to. Global commerce, the balance of trade, supply, demand – all the macro-economic fundamentals which themselves get tangentially buffeted by law, politics, warfare, disease, medicine, technology, R&D, culture and synthetic trends – will shape what is and what is not a trading opportunity at any given time.

While hedge funds, Funds of Funds, Mutuals and other financial investment corporates are required to provide performance metrics – you are not so burdened, so why do it? Your past 100 trades will likely bear little resemblance to the next 100 in terms of the basis for their entry and execution and management. The process is too fluid. Therefore it makes no real sense attempting to average what you did in the distant past with what you did in the more recent past. All it does it make any assessment of either tranche of trades completely inaccurate. Bit like averages of anything, they represent a mathematical entity which can be useful for modelling and functional derivation purposes, but of which no element of the set may necessarily take that value.

Your mental focus is vital even when trading very simple methods. As with decision energy mentioned in an earlier post, mental focus energy (it’s all the same energy obviously) is finite. Be sparing with how you use it. Time and energy spent massaging your trading performance data is time and energy that cannot be utilised for anything else and there are much better things to be doing with it even if (especially if) it’s ‘only’ keeping it in reserve ready for those times when the markets offer you a feeding frenzy.

All you ever really need to know about your trading performance is: Am I making money over the course of any given month? Down days and even down weeks are par for the course. Looking at detailed metrics will NOT make you a better trader. Your time would be better spent looking at how you trade and what you trade.

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