There are several formulas which might help you to analyze your trades. To get useful insight from them, you need to start with accurate numbers.
You said that your win/loss ratio is 75/35. Not possible. Did you mean 75/25? or 65/35?
Also, are you using approximate figures when you say $200 profit on 60 trades? And are you saying that your average loss is $35?
Let me ask you to pull some actual numbers from your broker’s statement. You should print it out; a printed copy that you can mark up will be easier to work with than trying to do this on your computer screen.
Use the printed copy of your broker’s statement to find or calculate the following:
[B]1.[/B] If there are any break-even trades in that group of 60 demo trades, you need to exclude them.
[B]2.[/B] After excluding break-even trades, count up how many winners and how many losers you had.
[B]3.[/B] Calculate your average winner. (Total up the dollar-value of the winners, and divide that figure by the number of winners.)
[B]4.[/B] Calculate your average loser in similar fashion.
[B]5.[/B] Find and record your largest winner, and your largest loser.
[B]6.[/B] Count and record your longest string of losers.
[B]7.[/B] Determine your maximum drawdown. Without knowing your trading method and trading rules, I can’t know [B]whether[/B] you need to determine maximum drawdown. It’s possible that your largest (closed) loss[B] is[/B] your maximum drawdown. But, depending on how you use stop-losses and/or how you actively manage your trades, it’s possible that one or more trades involved a drawdown[B] larger than indicated[/B] by the closed trades. You will have to determine this, possibly from memory, because you can’t read it in your broker’s statement.
Depending on the numbers you determine above, there are several ways to analyze your trading results. As an example, I will use the numbers from your previous post in the following formula:
[B]Profit = (number of winners)(average winner) - (number of losers)(average loser)[/B]
If I understood your previous post, Profit = $200, your win/loss ratio is something like 75/25, total number of trades = 60, and your average loser = $35. If those numbers are correct, then they plug into the formula, as follows:
$200 = (45 winners)(average winner) - (15 losers)($35 average loser)
Solving the equation, we find that your average winner = $16.11.
Now, we can calculate that your actual risk/reward ratio is $35 / $16.11 = 2.17:1
[B]If[/B] we had the correct numbers to start with, what would these results tell us?
By itself, your win/loss ratio of 75/25 (if that’s the correct number) is fine. And, by itself, a risk/reward ratio of 2.17:1 is not[B] necessarily[/B] bad. But, the combination of the two is giving you paltry results.
How do we measure “paltry results”? One way is: Total profit / number of trades. In your case, $200 / 60 trades = $3.33 average profit/trade. In other words, your average profit per trade is less than one-tenth of your nominal risk ($35) per trade.
But, all this is hypothetical, based on my guess as to what win/loss ratio you meant to state in your post.
If you can furnish exact numbers, I can help you further.
Clint
