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Measuring Your Forex Trading Systems Performance

This article looks at the ways that you can measure your forex trading systems’ performance.

Forex Trading Systems Performance

When you trade on the forex market you need to consider the performance of your forex trading systems.  It is important that you know how to measure the performance of your forex trading systems and what you should do with the results that you get.  When you look at measuring the performance you have to consider the success of your trading both in monetary amounts and in the process consistency.  You should also look at how the system relates to the current market.

Measuring the Performance of Your Forex Trading Systems

When you look at measuring the performance of your trading systems you need to consider how to do this.  The most commonly used method is to use a profit and loss ratio.  When you use this ratio you will need to determine what an acceptable profit and loss ratio is.  There are some traders who will use a ratio of 2:1 while others will use a ratio of 1:1.  The ratio that you use will vary depending on what you are looking at and the realistic expectations that you have of the market.  There are many traders who feel that a ratio of 1:1 when you are looking at the monetary gains is too unrealistic.

Measuring the Monetary Performance

When you measure the monetary performance of your trading system you have to look at all the trades that you have completed.  The trades that you look at need to be complete and you should never include the trades that are still open on the market.  When you look at the trades you have to see how many you have that made a profit and how many have made a loss.

Once you have this amount you will be able to create your profit and loss ratio.  The ratio will be the total number of all your profitable trades against the total amount of all your losing trades.  You should then consider if this matches the ratio that you have set for your trading.  If it does then you have a good performance.

Measuring the Process Consistency

It is important that you measure both the monetary performance and the process performance of your system.  To measure the process performance you need to look at the trades that you have completed according to your strategy against the trades that you have diverted from your strategy with.  You should then place this into the profit and loss ratio that you have.  The ratio that you use for the process performance should be tighter than the one used for the monetary performance.

Combing the Results

Once you have your ratios you need to consider what you have to do with the information.  If your system is performing well with both ratios then you do not have to do anything.  However, if you find that you have a high monetary performance, but a low process performance you will have a problem.  You could have a system that you are not stick to and you have to consider why this is.  All your trading should be done according to your strategy.

 

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