I believe that many traders have asked or been asked by others: How much do you earn in a month? Or: How much do you earn a year? So simply judging from the amount of income, or the percentage of income, can we see whether a trader's trading level is high or low? The rate of return is indeed the most basic indicator to identify a trader, but it is better to judge a trader with a high rate of return purely from the rate of return, so I think it is still relatively one-sided. Because depending on the amount of funds, as well as the withdrawal rate of account funds, the number of traded orders, transaction time, etc., these things are all factors that affect the profitability of the account. A simple example (in order to make everyone understand better, the example I gave is relatively extreme. I don’t really mean to make a comparison, but I just want everyone to really understand the meaning): a tens of billions of dollars An account with an annual income of 20%; an account worth tens of millions of dollars, an annual income of 50%; Comparison, then it must be that the account yield of 1,000 US dollars is the highest. Of course, in theory, what can be done with 1,000 US dollars, as long as it is superimposed according to the multiple, when the same trader trades, other accounts can definitely achieve an annualized 500% return. But as I said just now, this is only in theory. In actual operation, the larger the account, the stricter the risk control needs to be done, because once the loss occurs, the large account will lose a lot of money, and even if the small account is liquidated, it will only be 1,000 US dollars. Therefore, it is not comprehensive to judge the trading ability of a trader simply from the rate of return. So how to judge the strength of a trader's trading ability? Today I will tell you about three indicators. Through these three indicators, you can judge the trading level of a trader relatively comprehensively. This is also the indicator I used to assess traders in asset management companies. It is also the indicator that I usually use to measure my trading situation for a certain period of time.
The first indicator is the total profit and loss ratio of the account, and its calculation formula is: the maximum profit of the account / the maximum loss of the account. Simply put, this indicator is how much did you pay to get your biggest benefit? For example, if you also earn 100,000 U.S. dollars, A account is exchanged for 200,000 U.S. dollars; B account is exchanged for 50,000 U.S. dollars, and C account is exchanged for 10,000 U.S. dollars; It can be clearly seen that the profit is also 100,000 US dollars, and account C has earned so much money with only 10,000 yuan. At the same time, its risk is also the smallest, so there is no doubt that account C is more capable in this regard Some. In other words, if I were to hand over my money to these three traders, I would choose the trader who traded account C, because I would take less risk on my own. Of course, this is just an indicator, and it will be more extreme and biased to use a single indicator to measure the ability of a trader. Because an indicator can only reflect a certain ability of a trader, it is not comprehensive. This indicator can only reflect the peak-to-trough ratio of a trading account, but there is no way to reflect the winning rate, final value and other data, so we need to use the second indicator to judge.
The second indicator is the profit rate of a single transaction, and its calculation formula is: current rate of return/number of transactions. That is to say, the rate of return (percentage) of your current account is divided by the total number of orders you have traded, that is, how many transactions you have made in total (note here, it is the number of times, not the number of hands). This indicator and the previous indicator are actually used to measure transaction efficiency. But the first indicator is used to measure the overall rate of return, and this indicator is used to measure the rate of return of a single order. For example, the current profit of account A is 30%, and he has made 20 transactions, then the single transaction rate of return of account A is 1.5%. This value means that no matter how the transaction is, as long as my order enters the market, Then it will bring me a 1.5% rate of return (what, don’t understand? Think about it carefully, and you will understand). That is, if I make 100 transactions, normally my account rate of return should be 150%. Of course, the larger the statistical sample of this data, the better, and the longer the statistical time span, the better, so that the reliability of the final data obtained will be higher.
The third indicator is the risk-reward ratio, which is how many times your return is based on the risk. Still use the A account just now as an example. The final profit is 30%. Assuming that he trades with a 2% risk, then we can say that the risk-reward ratio is 15 times, that is, we have earned 15 times the risk value. The advantage of this is that regardless of your capital size, you can use such an indicator to make a relatively standard judgment. I think this kind of transaction will be more efficient.
Finally, we use a specific case to conduct a specific analysis through the above three indicators. Suppose we have two accounts.
Account A used to have a maximum profit rate of 40% and a maximum drawdown of 5%;
The maximum profit rate of account B was 100%, and the maximum retracement was 50%.
Because this is a case, for the convenience of calculation, try to use positive numbers to express. The above is the first data, let's talk about the second data:
The current profit rate of account A is 24%, and the single risk is 2% (that is to say, for an account of 10,000 US dollars, the fixed loss of each order is 200 US dollars), and it has been traded 18 times;
The current profit rate of account B is 84%, and the single risk is 4%, with 50 transactions.
We will now make a comparison according to the above data. First of all, the first indicator (total profit and loss ratio of the account), the maximum profit of account A is 40%, and the maximum drawdown is 5%, then the value of the first indicator is 40%/5%=8; the maximum profit of account B is 100%, the maximum retracement is 50%, then its value is 100%/50%=2; From this value, we can clearly see that the total profit and loss ratio of account A is higher than that of account B . In other words, if account A also loses 50% of the same amount, then its profit rate should reach 10 times the previous income, that is, a profit of 400%. From this aspect, we can see more clearly that in the same Under the same risk conditions, the income of account A is 4 times higher than that of account B.
Let's take a look at the second indicator, the profit rate of a single transaction. The single income of account A is 24%/18=1.33%, but the risk of each transaction is 2%; the single income of account B is: 84%/50=1.68%, the risk of a single transaction It is 4%; if we simply compare the two figures, 1.68% is higher. However, if the single risk of A account is increased to 4%, then the single profit rate of A account should also be expanded, which becomes 1.33%*2=2.66%; so we can also see from this that this When the single risk value of the two accounts is the same, the profit that account A can obtain should be higher.
The third indicator is the risk-reward ratio. From the above data, it is obvious that account A earns 24%/2%=12; account B earns 84%/4%=21; assuming that both accounts have been trading for 2 months, we It can be clearly known that account A has only 18 opportunities to trade in these 2 months, while account B has 50 times. The reason why account B can achieve a risk-reward ratio of 21 times is because it has much higher trading opportunities than account A in the same period of time. The number of trading opportunities may be limited by the trading system itself, or it may be limited by the trader's own trading style. But no matter what the situation is, a trader must strictly abide by the trading discipline. Account A can only have 18 trading opportunities in 2 months, not more than that; Account B has 50 trading opportunities. Therefore, in the case of a fixed time, the benefits brought by account B may be higher.
In fact, if you judge or if you choose a trader, the key lies in which point you pay attention to. If you are more concerned about risk control, or more concerned about the potential (obtained by increasing the risk) higher return value, then you can choose A account; The amount of return value, but you need to take a higher risk, then you can choose the B account. This is like buying a car. If you pay more attention to comfort, then you can choose a Mercedes-Benz. If you pay more attention to driving, then you can choose a BMW (as the saying goes, drive a BMW and ride a Mercedes-Benz).
Disclaimer: This article does not mean to criticize anyone, it is just a sharing, and does not mean to designate or criticize someone. If you have a better way to judge the level of a trader, you are welcome to write In the comments below; or which point you pay more attention to the above, you are welcome to comment below and express your personal thoughts.
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