{"id":37996,"date":"2014-06-15T10:56:06","date_gmt":"2014-06-15T14:56:06","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=37996"},"modified":"2023-05-24T09:27:14","modified_gmt":"2023-05-24T13:27:14","slug":"pnl-as-the-outdated-trading-stat","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/pnl-as-the-outdated-trading-stat","title":{"rendered":"PnL as the Outdated Trading Stat"},"content":{"rendered":"

Will PnL be an outdated trading stat one day?<\/p>\n

Five years ago MLB pitchers were mostly defined by Wins and how many they had. Today this is seen as an outdated stat that does not tell you the real value<\/a> of the pitcher. Sabermetrics has taught us there are more important measurements of a pitcher’s contribution like: percentage of ground balls, percentage of pitches swung at and missed, home runs allowed per nine innings, batting average on balls in play, etc. In the Sabermetrics universe, if you make an argument that one pitcher is better than another based on Wins you are considered an uneducated baseball fan.<\/p>\n

In trading most traders are judged and judge themselves based on PnL. When our firm meets monthly with our partners, we review each trader. PnL is the first place we start. \u00a0But we also discuss other metrics. \u00a0I wonder if this is how we will start our trader reviews in five years.<\/p>\n

Can’t you as a trader do better than defining your success based on PnL?<\/p>\n

Our desk uses the SMBU Performance Center powered by Tradervue to crunch our trading stats. Shouldn’t prop and independent traders be talking more specifically about our trading with more valuable measurements than PnL?<\/p>\n

Some ideas:<\/p>\n

1) Percentage of days stopped out
\n2) Win rate in trades
\n3) Ratio of average profit per trade to average loss per trade
\n4) Percentage of positive days
\n5) Percentage of days where gains are 2xs our intraday loss
\n6) Percentage of time spent in the trading zone (self-reported)
\n7) Measurement on picking the right stocks to trade<\/p>\n

Present PnL may be a measure of present market conditions, an outsized gain, etc. Better measurements may tell you how well you are actually trading and the likelihood of your ability to sustain success.<\/p>\n

Related Posts:<\/p>\n

How to Review Your Trading After the Close<\/a><\/p>\n

Are You Revenge Trading?<\/a><\/p>\n

Evaluating Your Trading Results<\/a><\/p>\n

“You can be better tomorrow than you are today!”<\/em><\/p>\n

Mike Bellafiore is the Co-Founder of SMB Capital and SMBU, which provides trading education in stocks, options, forex and futures. Bella is the author of One Good Trade<\/a><\/em> and The PlayBook<\/a><\/em>.<\/p>\n

no relevant positions<\/p>\n","protected":false},"excerpt":{"rendered":"

Will PnL be an outdated trading stat one day? Five years ago MLB pitchers were mostly defined by Wins and how many they had. Today this is seen as an outdated stat that does not tell you the real value of the pitcher. 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