If you want to succeed In Forex trading, it takes more than just a surface-level understanding of profit and loss. You’ll need to be intimately familiar with the volatility of the market and the variable levels of risk you take on by participating in it at any given time. Use these five essential metrics to judge your Forex performance and build the most well-informed strategy.
Essential Ways to Gauge the Performance of Your Forex Account
The most Important part of Judging the quality of your Forex performance Is to be fully conscious of your subtle performance values and their Implications Though a traders performance values are always accessible, there are many traders who don’t understand exactly how to make these values actionable. The following are five of the most important values to keep track of in order to gauge your performance.
Determine your Sharpe ratio
The market’s volatility is a far stronger Indicator of any trade’s chance of success than your current success percentage at any given time In order to stand the best chance at knowing what you stand to gain at the market’s current level of volatility, you need to be aware of your Sharpe ratio. Your Sharpe ratio Indicates the risk that you will take on from your current trading methods based on how much the market has been swinging lately.
By taking note of your Sharpe ratio, you will avoid the mistake of simply focusing on your profit percentage Instead of understanding how draw downs In the market have affected the rise and fall of your account. Lower your Sharpe ratio, less of return you will be able to expect in relation to your risks.
While a lower Sharpe ratio will indicate lower returns, it will also be more beneficial to those who wish to minimize the chance that their account being at risk of sudden market downside. Know your expectancy value Your expectancy value is a representation of approximately how much you stand to gain from your average successful trade amount.