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Measuring Trading Performance

  • #1
  • First Post: Sep 7, 2008 1:14am Sep 7, 2008 1:14am
What are the essential gauges for measuring trading performance?

I currently look at:

Net Profit
Success Rate
Average Loser
Average Winner
Reward to Risk
Consecutive Losers

I check the value of these indicators on a periodic basis over several internals. Those intervals are: weekly, monthly and quarterly

Are there any other indicators of trading performance that anyone feels I'm missing?

Any further insight would be tremendously appreciated.
  • #2
  • Sep 7, 2008 5:28am Sep 7, 2008 5:28am
Quoting mjotic
What are the essential gauges for measuring trading performance?

I currently look at:

Net Profit
Success Rate
Average Loser
Average Winner
Reward to Risk
Consecutive Losers

I check the value of these indicators on a periodic basis over several internals. Those intervals are: weekly, monthly and quarterly

Are there any other indicators of trading performance that anyone feels I'm missing?

Any further insight would be tremendously appreciated.
You can go quite technical with measuring performance ie sharpe ratio, sortino ratio, R ratio etc etc

But here are 2 important ones that are key especially -

1. Peak to trough drawdown. I was in a meeting recently with someone who markets various funds and in selecting a fund they mentioned that their most important criteria was drawdown. Makes sense.

2. May want to consider creating a spreadsheet with the daily distribution of returns as a percentage. This is a good measuring tool as it allows you to guage the volatility of your returns. By doing it on a daily basis it also means that you cannot 'hide' bad trading days.
  • #3
  • Sep 7, 2008 9:00am Sep 7, 2008 9:00am
Quoting mjotic
What are the essential gauges for measuring trading performance?

I currently look at:

Net Profit
Success Rate
Average Loser
Average Winner
Reward to Risk
Consecutive Losers

I check the value of these indicators on a periodic basis over several internals. Those intervals are: weekly, monthly and quarterly

Are there any other indicators of trading performance that anyone feels I'm missing?

Any further insight would be tremendously appreciated.
At the end of the month did I beat the market?

This arena really is black and white.

You win or you lose.
  • #4
  • Sep 7, 2008 9:45am Sep 7, 2008 9:45am
Volatility adjusted rate-of-return. Google "Sharpe Ratio" for more info.
  • #5
  • Sep 7, 2008 11:00am Sep 7, 2008 11:00am
i'm definitely looking into the sharpe ratio, thanks guys.

The distribution of the returns is also very interesting. I can see the importance of determining the return you get 90% of the time this way you see how consistent your performance really is.

To be honest I'm very sick of using averages. I think that it would be better to find the distribution of losing trades along with winning trades in order to calculate a more useful reward to risk ratio.


what I found on the net regarding the sharpe ratio:

The Sharpe ratio tells us whether a portfolio's returns are due to smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been.



I'm also curious to know what programs you guys are using to measure your trading performance. Is there something other then excel or tradestation that you could recommend?
  • #6
  • Sep 7, 2008 11:09am Sep 7, 2008 11:09am
sorry to bother you again Monaco but how do you determine the drawdown.

Do you create an equity curve and inspect the areas where it peaked and subsequently bottomed? The range of those two points is the drawdown

Do you have a better way of going about this calculation? I am very interested in this so please clarify if I'm going about this in the wrong way.
  • #7
  • Last Post: Sep 8, 2008 8:14am Sep 8, 2008 8:14am
Quoting mjotic
sorry to bother you again Monaco but how do you determine the drawdown.

Do you create an equity curve and inspect the areas where it peaked and subsequently bottomed? The range of those two points is the drawdown

Do you have a better way of going about this calculation? I am very interested in this so please clarify if I'm going about this in the wrong way.
Here is a link that gives a simple explanation:
http://www.investopedia.com/terms/d/drawdown.asp
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