Forex profit factor
Having pressed the "Start" button, one can test the expert advisor having the pre-defined input parameters and variables. The same action can be done by a double click with the left mouse button on the pass line in the tab of optimization results. If no line has been selected, the entire table will be copied to the clipboard. The "Copy All" command can be used to copy the entire table to the clipboard, as well. The report of the optimization results can also be stored in HTML format on the hard disk.
To do so, one has to execute the "Save as Report" context menu command. The same action can be done by pressing of G. More details are given in the sections of "testing Expert Advisors" and "Optimization". It is also used to be measured on a whole portfolio where you take the winners and the losers together to determine what was the highest sequence of accumulating losses in the portfolio. The Relative Drawdown The determination of this first type of drawdown begins where the pivot point is at the highest peak of the value of the portfolio.
For example, if you have a 50k account and you make it up to 55k but then fall down to 40k, then the drawdown is counted from the 55k to the 40k. This is the main difference between the two types. But then, from the 60k account, the portfolio went all the way back down to 50k. Apparently, no damage is done. As a trader, you need to be more aware of the maximum risk your strategy will allow. We Trade Forex — Come trade with us! If you put together the two values average winners in money or pips with the average losses , you should see that you might be taking average wins which are bigger or lower than the average loss.
This tells you whether you need to tweak anything in order to have the average losses lower than the average winners. Take all the losing trades , sum them together and divide them by the count of the losing trades. The same thing should be done for the winning trades. Sum up the value of the return of winning trades and divide them by the count of all the trades.
The end goal is to have an average win that is greater than an average loss. Common sense dictates that the average profit per trade be greater than the average loss per trade. While this would seem to be the sensible standard by which to apply the formula, the truth is, there are many ways to be successful and sustained as a trader.
Trading is a deeply personal business that relies on the individual strengths of its traders to succeed. The Sharpe Ratio Finally, in the list of ratios that should always be on your mind as a career trader, the Sharpe ratio takes its place. Named after its developer William F. Sharpe , the Sharpe ratio describes how much excess return you receive for the extra volatility you endure for holding a risky asset.
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Complete the following fields: Currency pair - the currency you are trading Account currency - the deposit currency of your trading account Trade size - the trade size in lots or units Open price - the entry price of your trade Close price - the exit price of your trade Direction - either buy or sell long or short.
The profit calculator takes the difference of entry and exit prices and multiplies it based on the pip value of your trade. The pip value calculation takes into account the currency pair, the lot size and your base currency account currency. Why is it important to use the calculator? When planning your trade, it is important to understand the potential profit or loss of a trade.
If you wish to calculate your profit with a more advanced calculator to include the exact risk you wish to use, head over to our position size calculator. How is profit calculated in forex trading? The most important metric to be linked with win rate is average win and average loss. Average win This is calculated by taking the sum of all winning trades and dividing it by the number of winning trades.
It is the expected value of an average winning trade. Average loss This is calculated by taking the sum of all losing trades and dividing it by the number of losing trades. It is the expected value of an average losing trade. A system with a high winning rate can still be a losing system if the average loss is much greater than the average win.
This important detail is often left out by promoters of high win-rate trade systems. For the purpose of the following examples, I will refer to the gains and losses using dollars, however gains and losses can be expressed in dollars, points, ticks, pips or whatever unit of measurement you choose.
These types of systems can be seductive because the high win rate is alluring for a while, and can often appear to be paying off, but then the inevitable losses occur, wiping out all gains. The premiums collected are small and predictable, but when the market suddenly moves against you, the losses can be significant. Notice that the first 15 or so trades were winners, but the next trade wiped out the gains and returned to break even. Also notice that there was a period starting around trade that went for over 50 trades where results were positive, but again, subsequent trades wiped out all the gains, and then some.
An example of a plan capable of this behavior is one where each trade risks a small amount of capital with the small expectation of hitting a home run. There are lots of small losers, but when the trade is successful , the gain is large.
Notice that the overall equity curve is positive, but there is a section in the middle where a string of over 50 trades is in draw-down. Although these types of plans can be profitable, many traders find it difficult to handle the trade psychology , and the stress associated with long stretches of losing trades causes them to abandon the plan. Each trade is just as likely to be a winner as a loser, but since the average winner is twice as high as the average loser, the overall equity curve is positive.
Notice that there are periods of draw-down just like the second example, but they tend to be shorter in duration because the overall equity curve is smoother. Seek Out The Profit Factor Calculation Here is how to calculate profit factor: the ratio of the sum of all winning trades to the sum of all losing trades. That makes sense; it simply means you need more total winnings than total losses. The second formula above shows how profit factor can be calculated using the win rate, loss rate, the average win amount, and the average loss amount.
It is easy to see now why the first trade plan was a loser. All else being equal, the higher the profit factor the more profitable the trade plan. Another important performance metric that makes use of the win rate, loss rate, average gain, and average loss is statistical trading expectancy.
The next two trade plans have the same profit factor, so you might be inclined to conclude that they are equally profitable, but notice that the trade plan 3 has a greater expectancy per trade.
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