Why Your Trading Strategy Metrics Are So Important!Etienne Crete 2020-07-11
Why Your Trading Strategy Metrics Are So Important!
One of the common mistakes among inexperienced traders is thinking:
“I've done my backtest and most trades were profitable…I'm good now!”
I just got off a call where that was the main issue with a trader in our Ultimate Prop Firm Trading program.
At first glance, a profitable backtest seems like a green light to move forward with your strategy.
However, there are some things that aren't being considered here.
They are metrics and drawdown.
First, what metrics can you expect for this strategy?
You'll notice quickly that a 40% win rate strategy is quite different from a 60% win rate strategy.
With a 40% win rate and 2:1 reward-to-risk, you can expect close to a 10% drawdown over 100 trades at 1% risk per trade.
However, with a 60% win rate and 1:1 reward-to-risk, a 10% drawdown is quite unlikely unless in the worst case.
But, if that happens, it would take much longer to recover.
Now, that's just one aspect you gain by learning the metrics of your strategy:
You're better able to know what to expect from your results in the market.
What about the maximum drawdown?
Well, imagine you jump in the market with the first strategy at a 40% win rate, over 100 trades.
You can easily go 10-20% in drawdown with a 1% risk per trade.
So what if you're doing a prop firm challenge and didn't realize that?
You're probably going to bust the challenge because you didn't know your stats.
If you know your stats, you could at least reduce your risk to account for the prop firm requirements.
That's why knowing your strategy metrics is so powerful.
First, you know what to expect (i.e.best & worst case scenarios)
Second, you can adjust for investors, prop firms, and your own requirements.
As always, feel free to reply to this email if you have any questions!
Keep crushing it 💪📈
My name is Etienne Crete (from Montreal, Canada). I'm a swing Forex trader (who has the chance to travel the world anytime) and help aspiring Forex traders develop a trading method that works for them so they can produce income allowing them to live with more freedom.
You see, a lot of aspiring Forex traders lack the confidence to pursue their dreams. I'm there not only to help you develop your confidence but also to implement the tactics that are proven to give you results. You'll develop Forex trading discipline and the other skills you need in NO time!
Ultimately, you'll get to experience what a day in the life of a Forex trader truly looks like, but you'll also have to be consistent with your Forex weekly review!
I produce a traveling Forex trader vlog and host the Desire To Trade Podcast. I was fed up with the “fake” millionaire traders and the “get-rich-quick-trading guys”. That's why you can expect more free content from me than what other people charge for!
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The Author (Translated)
My name is Etienne Crete (from Montreal, Canada). I'm a swing trader and help aspiring Forex traders develop a trading method that works for them so they can produce income allowing them to live with more freedom. I've interviewed the greatest figures of the trading world and consider it my mission to help you implement their advice!