In forex trading, you need an evaluation to see the advantages and disadvantages of the way you use trading. Without a clear and continuous evaluation, the trader will never know their performance. Thus, you need to know the kind of evaluation components for your successful trading.
Let’s check out some trading evaluation components that you need to know:
Annualized Return
You should use this evaluation component to calculate the amount of profit generated in 1 year. According to Investopedia, determining your annual investment returns is pretty simple. You just take your end of year brokerage account balance. Then, subtract your beginning of year balance, factor out all withdrawals and deposits, and then divide the difference by the beginning value amount.
Total Net Profit
It shows a net profit after loss and commission deduction. This value can be an evaluation of the trading system used in a specific time.
Max Drawdown
You can use this evaluation component to see the value of the largest loss in a certain period. The calculation is based on the highest peak capital with the biggest loss. By knowing this value, a trader can evaluate the risk and portion of the right risk-reward.
Average Trade Net Profit
This component evaluates the value of the average amount of profit or loss per transaction. This figure is obtained from the division of total profit transactions by the number of transactions that generate profit.
Percent Profitable
You can use this component to evaluate the probability of profit. The value is obtained by dividing the number of profit transactions by the total transactions made. There is no standard ideal percentage because it only adjusts to the amount of profit or loss determined by each transaction.
For example, traders who risk-reward is much greater. Then, the percentage of profit does not need to reach 70%. Only with 50%, he can still withdraw consistently because the profit is large but the loss is much smaller. However, if the risk-reward ratio is close together, then the percentage of profit must be large to above 70%.
