Despite the fact that the currency market may seem chaotic, successful trading is only possible with a systematic approach to it. Some newcomers to trading believe that in order to make money in the market it is important to be able to perform only two actions: buy and sell. But even a little experience in trading will be enough to make sure that this view of the trader’s work is wrong. In fact, its success is based on a quality trading system that allows it to generate income. Its creation or testing of a ready-made vehicle takes time before the best option for trading is selected. Any trading system requires a competent assessment. And if it will be high enough, you can switch to the application of the strategy in real trading. Therefore, analysis of trading strategies should become one of the important components of the trader’s activity. I want to tell you a little about him today.
Major performance indicators of the TS
In order to give a competent assessment of this or that trading system, it is necessary to know the basic indicators used for this purpose.Before all else, it is the net profit from trading. It is not difficult to determine it: we deduct the total amount of loss from the total profit.Profitability will be useful as well. This is a percentage of the profit received as a percentage of the deposit.Losses can lead to the loss of a part of the deposit. The trading account goes down. It’s called a drawdown. Its size, expressed as a percentage of the deposit, is also used for TC evaluation. The more it is, the more likely it is to lose money.Also analysis of trading strategies provides for the calculation of two very important indicators. They are called profit factor and recovery factor. It’s not hard to figure them out. The first indicator is calculated by dividing the total profit for all transactions by the total loss. The size of the deposit does not matter. The higher the coefficient, the more effective the TC is. As for the second indicator, it will be very useful to the trader. The recovery factor allows you to assess how quickly the deposit can be recovered after a drawdown. The calculation formula is as follows: profit is divided by drawdown. Here we mean net profit (profit minus loss).Analysis of trading strategies, of course, should be performed on a demo account to avoid unnecessary losses. If you have decided to use someone else’s trading system, which can be found on the network, it will not hurt to read the traders’ feedback about them and the developers’ comments.I also recommend paying attention to the psychological component when evaluating the TC. If you are emotionally uncomfortable with trading, it may make sense to find another more relaxed strategy.Fyodorov’s Inga10.09.2019