The 4 Top Stock Metrics to Monitor When Trading
You're invited to access Umar's Playbook, What metrics should you be looking at?, TradeZella user is quick to profitability
Author - TradeZella Team
Coming up this week
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- develop an A+ trading playbook
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- refine your current playbook
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- improve decision making
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What are some trading metrics I should be focusing on?
Alright folks, get out your trading journal. 📓
Whether it's a pen and paper, excel spreadsheet, TradeZella Dashboard, or other tool, we're about to get digging.
We're laying out FOUR key metrics you should be looking at to analyze your trading performance.
While these four aren't the ONLY ones you should EVER look at, they'll kick you off to discovering the major areas of improvement in your trading performance.
Let's get to it. 🏎 💨
💡 Win rate
Win rate alone doesn't paint you the whole picture, but can give you an idea of:
- what your trading style is like
- what you need to do to ensure profitability
- confidence in your system
We want to emphasize here that there really isn't anything wrong with a "low-ish" winning percentage (let's say around 35-40%).
If you're rocking a winning percentage on the low end, it doesn't necessarily mean that your strategy is broken.
It might be that you take tiny paper cuts often, but your winners are massive. If this works for you, then you've found your unique style of trading!
Maybe your strategy is to risk $5 to make $50 and it works out 3 out of 10 times.
3 winners = $150
7 losers = -$35
Total profit = $115
See what we mean? 🤔
With this data, you might decide to refine your system in a way that helps you foresee lower probability opportunities, hence improving your win rate over time and maximizing gains.
💡 Average winner vs Average loser
Pull up these metrics in your journal. If you have TradeZella, it's pretty simple. It's right here:
If you're concocting your own stats, use this formula...🧪
Sum of all winners/total # of winners
Sum of all losers/total # of losers
This metric (combined with your win rate) can show you what you need to work on.
If your win rate is on the lower end, your average winning trade needs to be MUCH larger than average losing trade to be profitable.
If your average winner is only a fraction larger than (the absolute value) of your average loser, then you know your win rate needs to be high in order to secure a profit.
Measure your performance across 30-100 trades and see where you fall on this spectrum.
💡 Most profitable setup vs least profitable setup
What does your trade distribution tell you?
Your favorite setups.
The setups you take most often.
The setups you like and don't like. While helpful, there's another one you can use...
Try checking out this chart next to your trade distribution...⬇️
Your Performance by Setups 👀
You'll see which setups your trading style likes the most, and which setups it coughs up.
In this example, we're seeing that this trader's breakout criteria is not only not yielding gains, but draining the profitability of the trading system.
With other setups like trend plays or reversals, this trader seems to do well.
The prognosis here might be...
Take a break from breakout setups until you can properly handle them.
Instead, focus on those trending setups, reversals, and even the break and retest.
If you haven't heard us raving about R-Multiple yet, you must be new here. 👋
R-Multiple refers to your risk to reward ratio.
Check out your planned vs realized R-Multiple.
"Planned" is...well...what it sounds like.
It's what you planned ahead of time for your R-Multiple to be.
So let's say you planned to hold a trade to a 2R profit target (meaning you're planning to make 2 times more than you risked).
However, you exited early at 1.5R. 1.5R is your realized R-Multiple. It's what actually happened.
If there's a consistent discrepancy between these values, you can make the assumption that you're perhaps not as confident in your plan as you thought you were.
Do some backtesting and figure out...
🔘 If I would have held to my profit target, would I have been profitable? Or did I exit early at the right time?
🔘 If I'm exiting beyond my profit target, am I setting my targets too close?
🔘 Why do I set my profit targets and stoplosses in the locations that I set them in?
🔘 Why do I not believe in my full plan when it comes down to taking a trade?
🔘 Is there something in my trading system that I need to adjust or my psychology and confidence?
So to recap...
Go grab your journal and pull the stats for:
Average winner vs Average loser
Performance by Setups
As you sift through these metrics, look for patterns and run those patterns across a series of 30-100 trades.
Create what-if scenarios. Form hypotheses. Backtest your findings.
What do you notice? 🧐
"I was able to turn profitable faster than most." Here's how.
This week we had a brief chat with Jay Trades.
He's a price action trader and active TradeZella user ✅
What makes Jay unique?
He's been trading for just about a year and a half and has ALREADY found success with trading.
For those that are new, that's pretty freakin' quick.
While it's quite possible for many traders to find success that quickly, it takes a special kind of open-mindedness, mentality, and willingness to adapt.
Trading is a career that often is counter-intuitive to the way we learn as human beings.
💡 You have to embrace failure, rather than feel like you've "failed".
A green trade doesn't always equal a good trade. A red trade doesn't always equal a bad trade.
You show up to work and sometimes lose money.
It's all kind of the opposite, you see? 👀
Another common trading mistake made in the beginning stages is focusing on too many indicators, noise, and outside factors.
These outside factors can confuse the beginner trader and often pushes them to focus on the wrong sets of information.
Jay mentioned to us his reason of why he became profitable much faster than the average trader.
"It was due to the fact that I focused on studying price and volume over traditional indicators."
Studying raw price action is truly the foundation of trading. So why fluster yourself with tons of extra information?
When we asked Jay why he chose to go with TradeZella as his trading journal, he said:
"I loved how easy TradeZella was to use. Almost anyone (especially those newer like me) can derive valuable data from their trading."
More specifically he brought up that journaling has helped him discover whether or not he's able to ride out his winning trades during certain circumstances. 📝
You're definitely using your journal properly, Jay! 🙌
As far as goals for the future, Jay's aim is to make $100k in profits this year. He knows it's a pretty aggressive goal, but as the saying goes, shoot for the moon! 🚀
He also mentioned he wants to go full-time with trading once he finishes up with college. 🤙
We're rooting for you, Jay! Can't wait to see how this year plays out for you.
If you're thinking, "Hey, maybe I could benefit from a more thorough trade review process..."
Check out the link below to get your instant access code. 😎
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