How to Trade Better - Know Your Trading Numbers for a Better Bottom Line

Hi, Brian McAvoy here with Inside Out Trading. And today we're going to talk about how to use your metrics to improve your bottom line in your trading, regardless of where you're at right now. Before we get started, make sure that you subscribe to this channel and if you're on YouTube, make sure you go ahead and click the notification bell. Now, the whole thing is in your trading, you know, you're, I mean, obviously you want to make money, so you're going to be watching your, you know, the bottom line, how much profit you make at the end of each month. But the thing is, you know, it's a business. And just like any business, you don't just look at the bottom line at the end of the month. You need to be looking at your other metrics as well. Now, some people get carried away and I've seen some, you know, tools where the analytics, it's like just page after page after page and that they're just overwhelming as far as all the analytics that they'll give you. But the thing is, there's really just a handful of metrics that you need to track on a regular basis to keep your trading really performing at its best, protect yourself from losing money and keeping your profits maximized. And what I like to do is I'll just go ahead and show you a tool that I created for this a while back. It's super user friendly. I made it specifically simple and user friendly, but it has all the critical stuff that you need. So let's go take a look at it. Okay, so what we're looking at here is a spreadsheet that I created a while back. Like I said, it's specifically for tracking your numbers. Doing the metrics every month, but doing it, you know, making the whole thing just super user friendly and super easy. And this is it. Now, there's more to it than just this one page, but I just want to go ahead and show you this, give you the overview because this is a really cool tool and it can make your life a whole lot easier, lower your frustration, improve your confidence in your trading, make discipline a whole lot easier by letting you know realistically what you're looking at with your trading, but also just tracking it. It's good business practice. So anyway, so this is the performance analyzer. And we move this viewer over here and tonight, see, this is it right here. And it's really cool because, you know, you just put in your numbers for your, for your trading. So again, this is super simple. You just put your numbers in the yellow boxes. And we'll start, you know, with the account balance. So let's say, you know, you start off the month with $25,000 account and your per trade risk limit using 2% and your drawdown limit. You don't want to draw down more than, say, you know, $4,000. That's just, that's where you want to, you know, it goes, it gets, you know, where you're down four grand, you want to stop and reassess. And then you come down here. And again, this is super simple. You just put in your number, your trades, the risk on each trade, and then the net profit or net loss. Just these three fields here will populate almost everything up here. This outlay field, it can be kind of an optional field for you here. It's not really necessary. That's just for if you want to track your return on your outlay, how much money you have tied up in the trades, like with stocks or your margin and that kind of stuff. But otherwise you can just leave this field empty. Everything else will go ahead and calculate for you, which is really cool. So let me go ahead and pull up an example of what we're talking about here and how this works, because again, this is just really cool. So let me pull up an example. Okay, so this is one of the sheets. This is a sheet that's got the numbers populated. Let me see what I did. I just went and grabbed some numbers out of a client's sheet and copied them in here. And again, that's all you need is just the risk and the net profit or loss for each trade. And this column here on the losing trades, as long as you stay within your risk limit that you set up here, this will stay green. If you have any where your loss exceeded your risk limit, it'll actually show red. So that's one for just your trading. When you're reviewing your trading. Okay, so we entered all the trades. This side over here is all the trades combined. There's beginning account balance, ending balance, the number of trades that were placed for this month. And this is a monthly tracker. The other thing I didn't show you, and it's kind of cool down here. We do have some different tabs where you can track your monthly trading and say you can just copy each tab when you want to create a new month, what you do is when you open this up blank, you just go and create a copy and you name it, January, February, March, whatever. And then you can keep the months going across here as you go along anyway. So that's again, this is the monthly tracker tab. And so when we're looking at the actual numbers, this is how it pans out. It's pretty cool. Like I said, this side is all the trades combined. So we have 41 trades, net profit of $3,100, which is pretty decent on a $2,500 account. It's a little better than 10%, 80.5% winning trades, profit to loss ratio, the average return per trade, some people call that expectancy. So these are your numbers overall. And this is system obviously is performing rather well. I mean not super aggressive though, you know, the good win rate, profit to loss ratio is reasonable. Average return per trade, I mean he's risking $100 on every trade. So this section here is the losing trades, the total number of losers, total losses, the average loss, and again comparing it to your per trade risk limit, the longest losing streak, the greatest continuous drawdown, on the losing streak, the greatest overall drawdown. So if you have a drawdown that you have a few winners mixed in there, it'll measure that as well. Then the actual loss to risk ratio, which is huge. This is really important because this tells you if your loss protection, your risk management is doing its job. As long as this is less than 1, you're not actually losing more than you think you're risking going into any trade. Then you've got this section up, here's the winners. So you got the number of winning trades, total of all profits, average profit, longest winning streak, how much you made on that winning streak, and then the actual reward to risk ratio. And this one here is pretty important too because if your trading system says one of your decision rules that you're only going in and you say, well, I'm not going to enter the trade unless I have a 2 to 1 reward to risk. But if it's actually delivering way less than that, then it's important that you know that you need to know what your actual reward to risk ratio is as far as delivered winners. This is the monthly tab and like I said, you can use this to track your trades every month, which is really cool. Now there's a couple other tabs in this analyzer. Remember this is the trading performance analyzer. There's a few other tabs to make things easy. We got one here and I love this tool. This is the profit potential calculator. And this one is specifically for back testing or forward testing. Anyway, for testing most of the fields are the same. Now this one, what's different is you'll have Your system ID the date range that you did your testing from and then any comments? What it does is it'll also calculate what the average monthly profit is based on your trades in the date range. So let's say you traded over five months, you're back testing. Well, when you plug that in here, then it'll calculate, okay, what is that per month as far as the average for all this? And that's really good, important stuff to know. And again with the conditional formatting, are the numbers good? Green, Great. Red. No. And then we also have a couple other tabs on here, which is pretty cool. The performance tracker plugged in some numbers, so you can see how this works. But this is for tracking your trading throughout the year. And if you look here, put in the beginning account balance and then your numbers for each of the numbers for each month as we go through the year. And so you can see how your months are progressing as you go throughout the year. And again it's got your different metrics that are important as far as your business. And then of course it also is tracking the stuff as far as the year to date as the year goes along. You can see where your year is tracking as you enter each month. These update and recalculate. And that's just really cool. Then this last tab we've got down here, this income scorecard, this one's just for fun. You won't use it all the time, but you can use it once in a while just for fun. Let's say you know your income that you want to be making off your trading is say 50,000 a year and you're putting in 20 hours a week. Percent you pay in tax, let's say it's 35 and your monthly fixed cost is $1,500. Well, what it'll do for you here is it's going to actually calculate, you know, what you're doing as far as pay wise, how your trading is paying you. And that's kind of funny because, okay, if you look at this, and here's your tax rate and all now this is pulled off of the last month that you entered in the monthly tracker or the year to date tracker. So it pulls those and it annualizes them all. So you can see, okay, if a whole year were to go as last month did, this is how your year would pan out. So like I said, it annualizes everything. And then here are your goals and analysis. And let's say you're looking at you want to make 50 grand the way it was panning out last month where you really only netted about 1,300 doll. While your annual income is going to be that much when you consider your fixed monthly cost. Oh, well, actually you're losing money at the end of the year and your hourly pay, not so great. Now if, let's say last month was a little bit better, your net profit was doing a lot better and you're up more where you'd like to be. Well, yeah, now you can see how it affects your hourly pay and everything and getting you closer to your annual income. Anyway, this is one where you can just play around with it and see what you know, your hourly rate is. As far as, you know, your trading and everything and what you're, you know, your trading score. This is, you know, generally, you know, how are you doing as far as getting toward your goals? And that's why I call it, you know, the scorecard. So anyway, this one's just for fun, but you know, these are, these are the different tools that are all part of the Trading Performance Analyzer. And it's a really cool tool for tracking all your metrics. And for right now, I'm running a really excellent deal on it. You can download it and actually give it, you know, just download it and play around with it for a couple weeks. It's a 14 day free trial and use it if you like it, you know, it's just 49 bucks. And then you got a tool used for forever for tracking your trading and your numbers, your critical metrics, make sure everything's staying on track. Anyway, this is a lot of fun. I just wanted to go and share this with you. But really tracking your numbers. See, here's the thing as far as how you would use this. Say your numbers weren't coming out so great and instead of net profit, maybe the profit isn't quite where you want it. Well, now you can look over here and you say, okay, well, how are my winners doing? How are my losers doing? How can I make some adjustments to improve my numbers? Instead of just guessing, you can say, well, my profits are actually okay, or my losses, they're a little bigger than I want. How can I reduce my average losses? Or the numbers, or how can I improve my percentage of winning trades? The metrics give you more insight into what's going on rather than just your bottom line and I'm not making enough money or I'm okay. This gives you some more insight as to what to do to fix it. That's kind of one of the main purposes of it is so that yeah, you know, you can keep your trading performing the way you want it to. Now I hope this has been helpful and I mean like I said I wanted to make this like a super simple tool for you to use, a little bit of fun but I mean you see how you can use it to improve your trading though and if you're tracking your numbers then you're more likely to be able to stay in continuous improvement mode, be making more and more money or if you're losing money, you know, if things aren't going the way you want. This is a good tool to help you get things where you want them to be. Again, it's super user friendly and right now, again 14 day free trial. Try it out, play with it. Let me go ahead and share a couple of comments of people that have gotten it and what they thought of it. So here Richard Daniels, he sent me this note and says hey Brian, just a note of thanks to you for the tpa. I've been back testing a new to me system and plugging the results into the analyzer. The information it gives me is vital. Understanding what this or any system can do, it's giving me a confidence in my system that otherwise might have been shaken by a few small losses. I have to admit when I first got this I thought it was a cool toy and I figured I'd use it sometime to track trades or something. Little did I know it would prove to be such a powerful learning tool. In fact, I can't imagine successfully trading without it. Now I also have to admit that I didn't really get everything you were talking about regarding psychology and how proper planning helps you to be better prepared mentally for the ups and downs of trading. But since I actually began to make use of this, it sort of pulls everything together. In fact I think I'll go back and re read everything again and see how much I really missed the first time around. Thanks again for something that really is helpful. That was Richard Daniels well and Pat Davis sent this in says I've been testing comparing two trading strategies for the last 90 days. I've gathered data from the backtesting and real time testing and plugged it into the analyzer. I was amazed at how easy it was to determine which strategy had the biggest effect on my bottom line. The TPA saved me a lot of time and made the process of comparison much simpler and easier. I'll continue to use it to keep track of my method's performance from this point on. This is an important tool for any serious traders. Toolbox thanks. Anyway, like I said, right now you can give this a 14 day free trial. Go ahead and download it, play around with it, make use of it. And you know, after 14 days, you decide you want to keep it. It's just 49 bucks. And if not, then that's fine too. But really, I mean, go ahead and do this. It will do so much for your trading. Again, keeping track of the numbers, it provides perspective. It helps you keep things real. It helps also keep your emotions and the distortions at bay that your emotions can do to you. You know what I'm talking about, your fears and all that kind of stuff. So when you're tracking your numbers, it keeps things real. It keeps you from kidding yourself, keeps you from scaring yourself. And just in general, it really will help your bottom line a lot in your trading. It's a good business practice. This is your business. Go ahead and do this. Like I said, 14 days free. And just give it a shot. You like it, great. If not, that's fine too. But I think you will buy, you will find some benefit. Well, and really, if nothing else, hopefully this video, you know, you've gotten to take a look at some metrics that will be helpful for you to be looking at in your trading. You know, again, just as far as a good business practice in your trading. Again, I hope this has been helpful. Now remember the link to go and take advantage of the free trial. It's right in the description down below. Go ahead, click on the link, jump on it right now. Try it out for 14 days. You'll have some fun with it. If you've enjoyed this video, give me a thumbs up down below. Share it with your friends. Talk to you soon. Cheers.