Measuring Progress: It's all in the size of your tool

Now that I've got your attention I want to bring to highlight an ongoing debate I have with myself and I've seen others have different viewpoints on. It's in regard to how to measure increase or loss in a non-biased fashion. I'm not talking about money/equity, which is biased. Someone making $10k always does 'better' than someone making $1k but if it took $1mil to make that $10k, and the $1k guy used only $1k to make his, who would you trust with your money? It appears to me that many traders and speculators of all sorts take the whole account size as a basis for their 100%. While this makes sense for a more traditional approach to investing it seems to fall short of conveying forex dynamics.

I feel that leveraged margin used seems closer to how much 'money' I'm using to open the position. So whether it's a mini or a full lot, or 10 lots, it represents the same thing. Whether the account is $100k or $1k the percentage of used margin levels the playing field for measuring progress. This is just my own take on it.

If I really take it to a counting nuts perspective to it. If I only 'spend' 30 'nuts' on one full lot and the price moves 5 pennies in my favor in a couple weeks I'm up 5000 'nuts'. With the nature of currency exchange and the high leverage you don't really spend that used margin sum to produce the return, you only really spend the spread. After that you're in the green...er, black. That really is not as representitive of the margin used either but dam that percentage looks assssstronomical!

That's why I feel margin used is just right!

Whut does ya'll think?

Woop woop! Multiple choices allowed and votes will be displayed!

Very entertaining Pipsta..
Will think about it.. Currently, I am using % growth of capital to measure my progress.. But I guess it doesn't really hurt to learn if there's a better way to measure progress..

Very nice thread I say..

So for now, I guess I'll go with % of capital..

Regards,
East

Well for me it's important how much I make, that gives me how much I can spend.
But when a stategy or a trader is compared with another the percentage is the important one.
So, in my opinion, it all depends how you see things

I'm with East on this. % growth on a month-by-month basis. Simple. That's how I like trading.

oops sorry niceguy i accidentally hit edit instead of quote.

well my wifes family has long called me a nut for being a trader or gambler as they call it so im going with the nut trader method.

A man after my own heart! The nut trader method is actually the most accurate measure of increase on money used as it pertains to margin spent/margin profit. But it doesn't seem to convey the neccesity of how much margin is needed in the account to enable the trader to use their $30 in that way. If you don't have the margin to cover the %1($1000) of a full unit, a broker isn't going to let you open the position. So while I'm on board that it's the reality of cash out-cash in it's not like someone can deposit $50 in an account and open a full unit position.

I see that the traditional method of percentage of account size is leading the way as I expected it would. To have a method of computation that can be understood between different traders from different markets is important. I guess if a trader has $50k in an account and is only using $3-5000 of their margin during the month that's really their decision even if there's no way to portray that with the traditional method of computation. If a trader has $10k in an account and is almost always maxing out their margin used they are using their margin to a fuller extent.

Thanks for those who participated in the poll so far. I was hoping to get a better understanding of other traders thoughts on this subject and add a little entertainment as well.

Hi James, well nothing seems to have changed on my post, so no problem.

Um, Pipsta, is there perhaps a 'self-delusion' problem here. What ever the size of your tool, you surely only ever start off with two nuts. That claim of 'starting with 30 nuts' may have impressed the girls at school, but we traders are worldly, mature people......

LOL...

What is nut trader? .......................I know snickers with nuts

Actually now that you mention it....maybe it was my declaration of starting with 30 nuts is what kept me from dating in H.S. I don't know how we ever survived as a species.....you can't even get into a position with just two nuts.