Measuring Performance from a Trade Journal
Calculate win rate, average R, expectancy, profit factor and maximum drawdown from your own trade records.
What you will learn
- Which fields a trade journal needs for risk analysis.
- How to calculate win rate, average win and loss, expectancy and profit factor.
- How to find maximum drawdown in R from a list of results.
- Why small samples can mislead.
Explanation
A trade journal is your record of every trade. For risk analysis, record at least: date, market, direction, entry, stop, exit, size, planned risk in euros, result in euros, result in R, costs, and whether you followed your rules.
Key statistics:
- Win rate = number of winning trades ÷ total trades.
- Average win / average loss = sum of winning (or losing) R results ÷ number of winning (or losing) trades.
- Expectancy = total R ÷ number of trades (the average R per trade).
- Profit factor = gross profit ÷ gross loss (both as positive numbers). Above 1 means profits exceeded losses in the sample.
- Maximum drawdown = the largest fall from a peak in the cumulative results to a later low. Measure it in R and in euros.
Calculate results after costs. A statistic from 10 or 20 trades can be strongly affected by luck. Treat early numbers as a rough picture and keep collecting data. Past statistics describe what happened; they are not a forecast.
Worked example
Hypothetical example: 10 trades, 1R = €100, results already after costs.
| Trade | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|---|---|---|---|---|---|---|---|---|---|---|
| Result (R) | +2 | −1 | −1 | +3 | −1 | +0.5 | −1 | +2 | −1 | −0.5 |
| Cumulative (R) | 2 | 1 | 0 | 3 | 2 | 2.5 | 1.5 | 3.5 | 2.5 | 2 |
- Win rate = 4 ÷ 10 = 40%.
- Gross profit = 2 + 3 + 0.5 + 2 = 7.5R. Average win = 7.5 ÷ 4 = 1.875R.
- Gross loss = 1 + 1 + 1 + 1 + 1 + 0.5 = 5.5R. Average loss = 5.5 ÷ 6 ≈ 0.92R.
- Expectancy = (7.5 − 5.5) ÷ 10 = +0.2R = +€20 per trade. Check: (0.4 × 1.875) − (0.6 × 0.917) ≈ 0.75 − 0.55 = 0.2R.
- Profit factor = 7.5 ÷ 5.5 ≈ 1.36.
- Maximum drawdown: the cumulative result fell from 2R (trade 1) to 0R (trade 3) = 2R = €200. The later fall from 3.5R to 2R is only 1.5R.
With only 10 trades, these numbers are a starting point, not proof of an edge.
Common mistake
Practice activity
Calculate win rate, average win, average loss, expectancy, profit factor and maximum drawdown (in R) for these hypothetical results: +1.5, −1, +2, −1, −1, −1, +1, +2.5.
Show solution
Win rate = 4 ÷ 8 = 50%. Gross profit = 7R; average win = 1.75R. Gross loss = 4R; average loss = 1R.
Expectancy = (7 − 4) ÷ 8 = +0.375R. Profit factor = 7 ÷ 4 = 1.75.
Cumulative: 1.5, 0.5, 2.5, 1.5, 0.5, −0.5, 0.5, 3. Maximum drawdown = 2.5 − (−0.5) = 3R.
Limitations: 8 trades is far too few to draw firm conclusions.
Key takeaways
- Record planned risk and R result for every trade.
- Expectancy, profit factor and maximum drawdown together describe a record far better than win rate.
- Always calculate statistics after costs.
- Small samples can mislead; keep collecting data.
Next step
In the final lesson you will turn everything from this course into a one-page personal risk policy.
Self-check
Answer the questions, then check your answers. You can retry as often as you like.
Automatic self-check for your own revision. Your answers are checked in your browser and are not seen or assessed by us. It is not an exam and not a qualification.
Your progress
“Complete” only means you marked the lesson as done. It is not a test of your understanding. Progress and notes are saved only in this browser on this device — not in an account.