Forex Strategies and Tips

Trading Analysis Spreadsheet 1

This spreadsheet is an app we have created for analyzing two important aspects of trading:

• Combining: Risk To Reward + Win To Loss Ratios

• Adaptive Versus Fixed Position Sizing

You can use it for one or the other goal of your analysis, or both at once.

Download the spreadsheet in your chosen format here:

How To Use The Spreadsheet

The way this spreadsheet works is by creating 100 randomized trades and summarizing the results.

Then it gives you an easy way to "roll the dice" and see another 100 randomized trades that match your settings.

Write down the results of each 'spin' and average them out.  Ten spins and you've quickly gotten a feel for whether your strategy will make you money over 1000 trades.

The trades are in random order just like in real life.  You might have a few wins or losses in a row.  A running balance is kept to see how you end up after these 100 trades are done, and the resulting equity gain or loss is reported to you in the orange and purple sections at the top.

Fill In The 5 YELLOW Boxes

1 & 2) Risk To Reward

You will set your R:R (risk to reward) by entering how many pips your average stop loss is and how many pips your average take profit is.  The readout below those 2 yellow boxes does the math for you, showing you the R:R that results from that. (Learn more about R:R).

For example, below we see that a stop loss of 25 and a take profit of 50 gives us a 200% R:R, or 1:2.

3) Win To Loss Ratio

In the bright yellow box "Win-To-Loss Ratio" you enter your number for winning trades/total trades.

For example you might have 260 recent trades you've taken and 104 of them were winners.  You'd enter 40 just as we show below. (104÷260=40%)

Because the actual number of winning trades is variable in real life trading, the spreadsheet is designed to match real life by giving you more or less that number of winning trades with each 'spin' of the dice; (i.e. each sample of 100 new random trades you generate).

If you enter 40 as your 'target' win ratio, then one time you might see the spreadsheet give you 41 wins; another time 36 wins or 31, 43 or 45. The average number of wins over several 'spins' will match whatever target win-ratio you set.

4) Starting Equity

Enter whatever you like - whatever you are likely to be trading.  This number has no bearing on the overall results, which are best understood as percentiles (%) anyway.  It's just to make it easier for you to read the findings.

5) Risk %

This refers to how much you intend to risk PER TRADE.  In other words, if a trade fails, how much of your equity have you put on the line, how much were you willing to lose?

This question is at the core of good money management in trading and is the founding principle upon which the Advanced Calculator is built.

You define your risk up front, so if the trade goes against you – you can live to trade another day and not be wiped out.

As an example, say you have a trading account with $1000 in it to start and you set your risk at 2%.  If you matched your trade size to the recommended position size generated by the Advanced Calculator, you would be assured not to lose more than $20 if the trade didn't work out.

From the Forex Smart Tools Spreadsheet

How To 'Spin The Dice' and See 100 New Trades

Notice the numbers in the gray boxes (6, 7, 5, etc.); click on any one of these boxes and enter a number that is different than the one in it now.

Presto! You immediately get 100 new trades randomly generated for you.

With each new roll notice how the readouts in the orange and purple boxes are all different, and the number for 'Actual wins shown' will change as well.

The specific number you enter does not matter at all.   If you enter the same number in the box that is already there, the spreadsheet says 'ahh, nothing has changed, I don't have to do anything'. Try again with another number.

Position Sizing: Fixed or Adaptive

The difference between the trades in ORANGE and the trades in PURPLE is how the position size for each individual trade is calculated.

The trades on the right in ORANGE use fixed position sizing, meaning that you are using the same position size for each one of your trades, irregardless of how your equity is growing or shrinking.

This is like a trader who starts the beginning of the month and says "I am just going to use 1 Lot for all my trades this month" - then sticks with that all month long.

The trades on the left in PURPLE use adaptive position sizing, meaning that you change the position size for each one of your trades, depending on how your equity is growing or shrinking.  If you are making money, you trade a bit more each time.  If you are losing money, you trade a bit less each time.  You adapt your position size to your equity.

Here is a screenshot from one 'spin' – we'll break it down in detail below...

From The Forex Smart Tools Spreadsheet

Let's pretend we have two traders, Trader Orange and Trader Purple.

Both traders start out with $10,000.  They both use a 25 pip stop loss.  They both go for 50 pips take profit.

They both figured out that a 2% risk for a 25 pip stop will be 8 mini lots, or 0.8 standard lot.

Both take a loss in their first trade of this series.

Trader Orange is going to stick with their 0.8 position size all month long. Trader Purple put their new equity ($9800) in the Calculator and sees that their new position size for their next trade should by 0.78 lot now.

Both take a loss in their second trade.  Orange loses a bit more than purple because of their larger position size ($200 instead of $196).

Again Purple re-calculates and sees that now with an equity of $9604 they should trade 0.77 lots.

Trade 3 is a loss.  Purple has lost $192 while Orange loses $200. And so it goes...

How does this difference pan out over time?

You can see the net result over 100 trades at the top of the spreadsheet in the readouts.  For instance, in the screenshot above we see that the adaptive positioning gives trader purple 5.6% more profit than trader orange.

Track How Your Results Add Up

Remember - each spin is a random set of 100 trades.  So don't take any one spin as representing everything you need to know about your trading.

As you work with the spreadsheet, keep a piece of paper by your side and take note of the difference between the fixed position sizing and the adaptive position sizing results.

If you haven't been using adaptive positioning yet - this should be a BIG wake up call. And there is something about seeing it for yourself that is more compelling than hearing someone tell you about it. Watch the results carefully, batch by batch of 100 random trades and see for yourself.

You can even set up your own spreadsheet to average the results over many successive 'rolls of the dice' (i.e. recalculations of the spreadsheet). Remember, adaptive position sizing will not always give you better returns on any given batch of trades, but the average over time almost certainly will. Do the math to see this average for yourself and see what we mean.

You may want to define a range for the win percentage that you'll count in your adaptive position sizing averages. Each time you 'roll the dice' with the spreadsheet by generating a new set of 100 randomly distributed trades, you get more or less than your target number of wins per 100 trades. Define for yourself in advance what range you want to use. For example, if you set 60 as your target for the win to loss percentile, then you might decide to count all the results you get from selections ranging 5 pips on either side of that, so from 55 - 65. If a recalculation shows you 53 or 54 or 68 you would then ignore those results. Define that range to be however wide or narrow as you see fit.

Adaptive Positioning Usually Wins  ~ Big Time

If you enter your own numbers, Win to Loss, Risk to Reward, Risk Profile - and then take 20-40 spins and keep track of the results - and end up finding that you could MAKE A LOT MORE MONEY by using Adaptive Position Sizing, you may be left wondering - how do I do this?

Well, many trading platforms now offer a built-in position size calculator.  If yours does - start using it.

If your platform doesn't offer one, or if the one they offer is hard to use - get the Forex Smart Tools Calculator.  We make it easy to track changes in equity and position size correctly before you take each trade.

Also remember that most free Calculators, the ones that may come with your platform, are intended for simple trades.  In and out.  But if your trading strategy involves scaling into a trade in multiple legs, cost averaging or stop and reverse plans, then these simple free calculators will do you no good.  The Forex Smart Tools Advanced Calculator is designed to work with all these styles of trading.

It may seem like a hassle to position size before you take each trade, but the difference in the bottom line of how much profit you might see can be well worth the bit of extra effort.

Video: Let us Explain The Spreadsheet To You