I have been dealing with performance indicators my entire business life.
When I ran a consultancy, I set up performance indicators for our clients. Thus, we could track the success of implemented measures.
Later, I led a technology company that was focused on performance indicators for the aviation industry.
Therefore, I am not exaggerating when I say performance indicators have been my bread and butter.
Subsequently, when I started crypto trading, it felt natural to set up performance indicators, too.
Today, I want to share my top three indicators. Indicators I use to track the overall performance of my trading system.
It is worth mentioning that I use different indicators on different levels of detail. The critical aspect is that they are linked to each other.
However, today, we look at the highest level. In other words, we look at the indicators that ultimately tell me whether my strategy is working.
In general, I try to reduce the amount of performance indicators to a minimum. I’ve learned that quality beats quantity when it comes to performance indicators. In other words, you need the proper set of indicators instead of tracking a whole bunch of numbers.
Here are my top 3 indicators I always use:
Crypto Trading Performance Indicator #1 — Return on investment (ROI)
Obviously, this is the most important indicator. If I had to choose just one performance indicator, I’d go for this one. Here’s why. I consider trading an investment. I spent an amount x on a trade (similar to someone who’s investing in a company, real estate, or whatever). Accordingly, the return you get is the ultimate quality indicator.
Moreover, this indicator is the most efficient way to tell if your trading system works.
If your ROI is positive, you’re on a good path.
However, one important aspect to understand is that the ROI is a so-called informative performance indicator. That means it provides insight, but it is difficult to derive an action.
That means I usually use the ROI to assess a strategy and use other indicators to tweak the strategy.
Crypto Trading Performance Indicator #2 — Win Rate
I am obsessed with backtesting. It provides certainty.
Therefore, the historical win rate is essential to my trading system.
I usually use Crypto OS to get backtested information or to backtest my strategy. My golden rule is not to enter a trade with a win rate below 80%.
Although I know that historical performance doesn’t tell you anything about the future, backtesting and a proper win rate, give me the confidence to set up a trading system.
Moreover, my performance has steadily increased since I incorporated the win rate into my trading system.
Crypto Trading Performance Indicator #3 — Risk/Reward Ratio
Crypto trading is about managing risks — and aiming for high rewards at the same time. Accordingly, I implemented the risk/reward ratio into my trading system very early.
I only take trades with an RRR of at least 1:3. However, this is not a fixed ratio. I adjust it to the market and current situation.
For example, in bullish markets (or bull runs), I opt for a higher ratio like 1:4 or 1:5. But again, this is not a fixed ratio. I constantly monitor the performance of my trading systems and adjust according to the market and, ultimately, my ROI.
Want to get started with Crypto Trading?
If you made the decision and want to get started with crypto trading, you can check out Crypto OS.
It’s the platform I’ve developed based on all the mistakes I made.
It contains data-driven trade signals, backtest data, AI forecasts, trading bots, etc. Try it for free!
