How to Track and Measure The Performance of Your Cryptocurrency Trading Strategy

Sat Sep 02 2023

Testing and measuring is one of the most important aspects of creating a successful trading strategy. Here are some tips on how to measure your trading strategy, either as a manual or algorithmic trader.

Investing in cryptocurrencies can be rewarding, but like any investment, it requires a strategic approach. The old saying, “What gets measured gets managed,” rings true in crypto trading. Understanding how your strategy performs is essential for success. In this article, we’ll explore how to maintain a trading journal and harness the power of algorithmic platforms, specifically Aesir, to optimize your trading efforts.

Keeping a Trading Journal

A trading journal is more than just a record of transactions; it’s a window into your trading psyche, habits, and strategy outcomes. Properly maintained, it can reveal patterns, strengths, and areas of improvement.

Creating a Trading Journal

• Basics First: Start with essential details like date, currency pair (e.g., BTC/USD), entry price, exit price, trade volume, and trade direction (long or short).
• Motivations & Emotions: Detail the reasoning behind each trade. Was it based on technical analysis, news, or a gut feeling? Also, jot down your emotional state. Were you feeling confident, uncertain, or impulsive?
• Results: Capture the profit or loss for each trade. This will give you a clear understanding of whether you’re consistently profitable or if there are specific trades that tend to lead to losses.
• Additional Notes: These can include market conditions, any mistakes made, lessons learned, or other observations.

Interpreting the Journal

After logging several trades, periodically review your journal:

• Pattern Recognition: Spot recurring patterns. Do you notice that a specific strategy consistently results in losses? Or maybe you find that you make impulsive trades when a particular news source publishes bullish forecasts?
• Emotional Management: Over time, you’ll discover if emotions are your ally or adversary. You may find that trades made in a specific emotional state result in better outcomes than others.
• Strategy Evolution: Based on the data, refine and modify your strategy. Remember, a trading strategy is a dynamic tool that should evolve as you learn and grow as a trader.

Drawing Conclusions

It’s tempting to make conclusions after a few trades, but resist the urge. Wait until you have a substantial amount of data before making any significant strategy modifications. Ideally, you’d want several weeks or even months of consistent logging.

Using an Algorithmic Cryptocurrency Trading Platform

Algo crypto trading platforms such as Aesir allow traders to quickly and efficiently test, and log and measure the performance of their trading strategies with the use of Cryptocurrency Trading Bots. Another advantage that these platforms hold is that by allowing a trading bot to execute your strategy, you eliminate variables such as interpreting signals, timing and more importantly emotional reactions to market movements, making it easier to draw conclusions about the performance of the strategy itself.

Crypto trading bots generate automated logs

Manual logging is prone to errors. Aesir automates this process, recording every trade detail, and presenting it in an easy-to-understand format, so that you can focus on creating trading strategies rather than having to log and file away your trading performance.

How to get started with algorithmic trading

To get started simply create an account on Aesir and start building your trading strategy in Create New Strategy. Alternatively, if you don’t currently have a trading strategy that you’re looking to test and automate, you can head over to the Social Hub. Here you can see the profitable strategies that other traders are running, and you an even clone them with a single click.

Once you have a trading strategy, Start it paper trading more, checking in regularly to see how it performs. If you’re happy with your strategy’s performance, it’s time to deploy it on the live market.

Conclusion

Whether you prefer trading manually or using an algorithmic cryptocurrency trading platform testing and measuring the performance of your strategy is key to your trading success.