Trade Explorer: for pro traders
November 25, 2011
If a hedge fund manager tells you he's "up 8% this month," he's invariably including the profit/loss of his open trades. That's because the financial industry speaks in terms of equity, which includes the marked-to-market value of open trades. And it's that way for a reason – the profit/loss on an open trade is every bit as real as on a closed trade, and performance metrics can be completely misleading when open trade activity is excluded.
As Product Manager for the Trade Explorer, I hear from members who are concerned that their Trade Explorer's statistics are not as favorable as shown on other sites offering trade analytics. Most of the time the discrepancy is due to the trader carrying open losses in their account, which are only being accounted for on their Trade Explorer.
To illustrate this point, I opened a demo account and entered ten random trades. Then I closed the five trades that were winning and left the losing trades open. Here are a few metrics, for the same account, from Trade Explorer and Myfxbook:
Trade Explorer
Myfxbook
The account performance looks a lot better on Myfxbook because their statistics are based on balance, thereby ignoring the huge open loss. Since the Trade Explorer's statistics are all based on equity, the open loss is reflected throughout all metrics, making the performance appear worse.
It's not just these top-level statistics that are affected by the choice of equity or balance. Periodic metrics (e.g., How much did I make yesterday? How much did I make last February?) will change dramatically depending on how open trades are accounted for.
Out of the other eight sites we know of offering Forex performance analyzers, half of them are mostly balance-based, three are somewhat equity-based, and only one does a good job of reporting equity throughout. Since the Trade Explorer is one of the two analyzers that is completely equity-based, there's a good chance your performance will, at times when you have an open loss, look worse on the Trade Explorer than elsewhere.
While this may keep some people from using the Trade Explorer, equity-based statistics are a must for professional traders. And professional traders are who the Trade Explorer was built for! We went to great lengths when developing the product to ensure that it was in line with financial industry standards, and that everything was based on equity.
Btw, we know balanced-based statistics do have their use. They can be helpful in performing what-if scenarios, for example. That's why the Trade Explorer was built with an 'Equity/Balance' toggle that allows you to flip to balance-based statistics when needed.
If you have any questions or feedback, please send us some mail!
As Product Manager for the Trade Explorer, I hear from members who are concerned that their Trade Explorer's statistics are not as favorable as shown on other sites offering trade analytics. Most of the time the discrepancy is due to the trader carrying open losses in their account, which are only being accounted for on their Trade Explorer.
To illustrate this point, I opened a demo account and entered ten random trades. Then I closed the five trades that were winning and left the losing trades open. Here are a few metrics, for the same account, from Trade Explorer and Myfxbook:
Trade Explorer
Myfxbook
The account performance looks a lot better on Myfxbook because their statistics are based on balance, thereby ignoring the huge open loss. Since the Trade Explorer's statistics are all based on equity, the open loss is reflected throughout all metrics, making the performance appear worse.
It's not just these top-level statistics that are affected by the choice of equity or balance. Periodic metrics (e.g., How much did I make yesterday? How much did I make last February?) will change dramatically depending on how open trades are accounted for.
Out of the other eight sites we know of offering Forex performance analyzers, half of them are mostly balance-based, three are somewhat equity-based, and only one does a good job of reporting equity throughout. Since the Trade Explorer is one of the two analyzers that is completely equity-based, there's a good chance your performance will, at times when you have an open loss, look worse on the Trade Explorer than elsewhere.
While this may keep some people from using the Trade Explorer, equity-based statistics are a must for professional traders. And professional traders are who the Trade Explorer was built for! We went to great lengths when developing the product to ensure that it was in line with financial industry standards, and that everything was based on equity.
Btw, we know balanced-based statistics do have their use. They can be helpful in performing what-if scenarios, for example. That's why the Trade Explorer was built with an 'Equity/Balance' toggle that allows you to flip to balance-based statistics when needed.
If you have any questions or feedback, please send us some mail!
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