Definition
The average percentage loss incurred on your losing trades.
Formulas
- Stocks: Avg % on Losers = (Sum of % Losses on Losing Trades) / (Number of Losing Trades)
- Forex: Avg % on Losers = (Sum of % Losses on Losing Trades) / (Number of Losing Trades)
Examples
Stocks Example
- Trade 1: Investment of $1000, Loss of $150 => -15% return
- Trade 2: Investment of $1500, Loss of $200 => -13.33% return
- Trade 3: Investment of $500, Loss of $30 => -6% return
- Avg % on Losers: (-15% – 13.33% – 6%) / 3 = -11.44%
Forex Example
- Account Balance: $5000
- Trade 1: Loss of $100 => -2% return
- Trade 2: Loss of $300 => -6% return
- Trade 3: Loss of $75 => -1.5% return
- Avg % on Losers: (-2% – 6% – 1.5%) / 3 = -3.17%
Key Points
- Risk Assessment: Helps evaluate how much you typically lose, in percentage terms, on unsuccessful trades.
Considerations
- Investment vs. Account Balance: The percentage loss calculation differs for traditional investments vs. forex trading:
- Traditional Investments: Percentage loss is calculated based on the trade’s specific investment.
- Forex: Percentage loss is often calculated based on the overall account balance before the trade took place.
