Trade-specific metrics
Trade-specific metrics are quantitative measures used to evaluate the performance and characteristics of individual trades in trading activities. Here are some of the most commonly used trade-specific metrics in trading:
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Did you know that the Profit Factor, a key metric used by traders, can be thought of as the “return on stress” ratio? It measures the total profit divided by total losses, so a Profit Factor of 2 means that for every dollar lost, two dollars are gained – essentially doubling the trader’s reward for their stress and effort!
- Win Rate: The percentage of trades that result in a profit out of the total number of trades.
- Average Win: The average amount of profit made from winning trades.
- Average Loss: The average amount of loss incurred from losing trades.
- Profit Factor: The ratio of total profits to total losses, indicating overall profitability.
- Trade Frequency: The number of trades executed within a specific period.
- Risk-Reward Ratio: The ratio comparing the potential profit of a trade to its potential loss.
- R-Multiple: A comparison of the actual outcome of a trade to the expected Risk-Reward Ratio, evaluating execution efficiency.
- Max Adverse Excursion (MAE): The maximum unrealized loss experienced by a trade before it is closed, used to assess risk tolerance.
- Max Favorable Excursion (MFE): The maximum unrealized profit achieved by a trade before it is closed, helping evaluate trade potential.