How to Measure Your Performance as a Trader or Investor

If someone asked you to rate yourself as a trader, how would you evaluate yourself? Would you consider yourself to be highly successful, mediocre or needing a lot of improvement?

Do you even know how to evaluate yourself at this moment?

Let’s make one thing clear: It’s essential that, as a trader or investor, you track your progress so you can evaluate your performance.

Measuring your performance can provide valuable information, including if your strategy is working or not. After all, you don’t want to continue with the same approach if you’re losing at almost every trade.

Of course, if you’re using a broker, you can always receive feedback there (for example, check out this top regulated brokers list) — but you must learn to track your performance as well.

What Is Good Performance

Before looking at ways to measure performance, we first want to figure out what’s considered acceptable. Is it something so simple as ensuring a positive return on investment — or is there more to the picture?

The only one who can answer that question is you. The performance of one trader shouldn’t dictate your level. Instead, set that level yourself.

When developing your trading or investment strategy, set a performance level. To you, when would you consider yourself successful, versus when you would say you’re under-performing and need to tweak something? Once you define that for yourself, then you can start measuring your performance.

With that in mind, here are four ways you can measure your performance as a trader or investor:

Your Profits

The most obvious answer would be to look at your profits. If you’re losing more than you’re winning, that’s a big sign you’re not performing very well.

Although your profits give a clear indicator of your performance level, it doesn’t provide you with more detail about where you can improve. That’s why we have other methods to include in your measurement.

Average Win vs Loss Size

Numbers don’t lie; when you measure your profits versus losses, take a look at the average size. Your earnings will tell you that something is working. However, the average will provide a few more details. If your average win size is only slightly higher than the average loss size, you’ll still want to adjust your strategy.

Holding Time

How long are you holding onto a trade by the time you make a move? Your hold time can tell you if you’re holding onto a stock for too long or not long enough. If your longer holds result in more losses with a heftier price average, you’ll need to evaluate if you’re holding for too long.

When You’re Trading

The time of day can influence your trading performance. Make a note of when you’re trading so you can compare those numbers. If you’re winning more trades when the markets first open, that’s telling you something positive. However, if you’re trading mostly near the end of the day and losing most of your trades, that could be a sign to rethink your timing.

Remember, how many trades you win versus how many you lose only give you a portion of the picture. Once you dive a bit deeper into the numbers with the methods above, you’ll gain a better understanding of your performance level. You can then take this information to your broker for review. In fact, here’s a list of brokers in South Africa if you’re still looking for one.

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