What You'll Learn
- ✓Understand key P&L metrics
- ✓Analyze win rates effectively
- ✓Use MFE/MAE for optimization
- ✓Study trade distributions
- ✓Identify edge in your strategy
- ✓Make data-driven refinements
Understanding P&L Metrics
Key performance indicators every trader should track:
- Total P&L: Overall profit/loss
- Win Rate: Percentage of winning trades
- Profit Factor: Gross profit / gross loss
- Average Win: Mean profit on winning trades
- Average Loss: Mean loss on losing trades
- Expectancy: Expected value per trade
- Max Drawdown: Largest peak-to-trough decline
- Sharpe Ratio: Risk-adjusted returns
Win Rate Analysis
Win rate alone doesn't tell the full story:
- High win rate (>60%) can still lose money if avg loss > avg win
- Low win rate (30-40%) can be profitable with good risk-reward
- Look at win rate in context of profit factor
- Analyze win rate by time of day, day of week
- Compare win rate across different symbols
- Track how win rate changes with position size
Max Favorable/Adverse Excursion
MFE and MAE reveal optimal exit levels:
- MFE: How far trades move in your favor before closing
- MAE: How far against you before closing
- Identifies if you're exiting too early or late
- Shows optimal stop-loss and take-profit levels
- Reveals if trailing stops would help
- Data-driven exit strategy optimization
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