How to Measure Trading Success in Forex?
Typically, when a Forex trader closes a position, the outcome is either positive (gain) or negative (loss); the breakeven trades happen but are quite rare and uninteresting. Trading platforms usually display the outcome as the value in pips or currency units, or both. Detailed account reports can also show them in percentage to the account balance at the moment of trade's liquidation. Some reports also produce complex
Pips — the plain difference in open price and close price of a given position. A good thing about pips is that they let you compare trades easily without the data being spoiled with position size and other parameters. The bad thing is that pips are mostly incomparable across different currency pairs. Also, this number alone, unfortunately, tells nothing about how much money the trade has brought you, how does it relate to the risks you have taken, and how big of a leap for your total account balance this trade was.
Dollars (or other currency) — a plain, informative, and tangible measure of the trade's success. After all, earning money is every trader's goal when they start buying and selling currencies. The benefit of using this metric is obvious. The negative side is that it makes impossible to compare strategies on accounts of varying sizes. It also tells you little about how much you risked to get that amount of USD (or EUR, or whatever). Were you scalping for 3 pips with a 5-pip spread on a currency pair? You will never know it from the dollar value alone.
Percentage points (%) — turning your profit or loss into percentage points (relative to the risked amount, account balance, starting deposit, or anything else) makes things much more comparable. With percentage points, you can even compare your performance as a Forex trader to
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