Crypto Trading Performance

Equity and Forex aren't the only heavily traded markets in today's world. The mainstream has begun to investigate the crypto trading room as Bitcoin and Blockchain have grown in popularity. And, based on the increase in crypto trading volume, this sector has already emerged victorious.

Crypto Trading

The buying and selling of crypto assets is what crypto trading is all about, as the name implies. It entails market forecasting, in which traders foresee and place themselves for a future step. Day trading is a form of crypto trading in which traders open and close positions on the same day.

Cryptocurrencies, like the Foreign Exchange (Currency) market, are exchanged in pairs rather than individually. When they suggest, for example, that Bitcoin is currently worth $54,000, they are referring to the cryptocurrency pair BTC/USD. It's worth noting that the quote currency (right) may also be a cryptocurrency (for instance, ETH/BTC).

It's easy to get started with cryptocurrency trading. Everything you have to do now is get a cryptocurrency wallet and sign up for a cryptocurrency exchange (aka broker in the forex market). After you've successfully registered, fund your account to start trading.

Crypto Trading Performance

Trading cryptocurrencies is similar to trading other asset classes. The reasoning, technicalities, and objectives are all the same. Cryptocurrencies are traded in order to benefit from them. As a result, standard business principles and strategies apply to the crypto market as well.

It's critical to understand your success as you gain experience trading cryptos. Keeping track of your profits and losses is important for evaluating the effectiveness of your trading plan, risk and money management, and investment decisions.

Most traders assess their success by measuring the percentage gain or loss for a given time span. A positive percentage return denotes good results, while a negative percentage return denotes bad performance. While the strategy appears to be rational, it is inefficient in terms of growing an account and improving the strategy. The traditional approach might work for linear growth, but it's unlikely to work for exponential growth. As a result, other powerful metrics must be used to assess one's trading efficiency, especially in the crypto market.

Tracking crypto trading output may appear to be a simple task, but it is often difficult and complex. The following difficulties are the source of its complexity:

• The majority of crypto traders hold multiple coins on multiple exchanges.

• Involves various forms of asset pricing conventions. Instead of fiat currencies, crypto pairs are quoted against each other.

• Accounting techniques are non-standardized, unlike in conventional markets.

Risk Analysis

Let's start with the basics before moving on to the main metrics for cryptocurrency trading. A good trader not only has an efficient trading technical strategy, but also the ability to manage risk.

Risk – The possibility that market uncertainty may cause stocks to shift in the opposite direction.

In order to preserve continuity in trading, traders must weigh risk in addition to positive returns when evaluating key performance indicators. Using risk-adjusted returns is simple in conventional markets, but it becomes more difficult in the crypto industry.

Key Performance Metrics for Cryptocurrency Trading

The targets of both markets – crypto and conventional – are the same, but when it comes to success metrics, there are some differences.

Huge overnight moves, for example, are common in the cryptocurrency sector. They are known for having higher volatility and lower liquidity than equities and forex. As a result, using key performance metrics for cryptocurrency trading could impede overall crypto analysis to some degree. Having said that, technical research, which is commonly used, would compensate for the stumbling block. This is due to the fact that crypto price movements are usually influenced by price behavior rather than fundamental factors.

Are income the same for both asset classes? No, it's not true. The performance metric will remain the same, but the benefit metric will be modified.

Performance Measurement in Crypto Trading

The cryptocurrency industry is widely regarded as the most unpredictable. Seeking a profitable strategy in this unpredictably volatile market is a difficult challenge. In theory, a profitable strategy cannot be determined by adding up winning trades. The findings can be measured using systematic research techniques. The following is a quick rundown on how to go about it:

The first step is to choose the currency in which you want to measure your figures. It does not have to be a fiat currency, unlike the forex market (like USD, EUR, GBP, etc.). The calculated result will then be compared to a predetermined benchmark. Another factor to consider is missed opportunities, or whether you might have made more money if the money had been spent rather than kept in the account.

Let's take a closer look at and phase of the process now that we've figured out how to measure crypto efficiency.

• Selecting a crypto asset

Choosing a currency to settle your traded assets may seem to be a simple task, but it is very complicated in the crypto world. As previously mentioned, in the conventional market, the results obtained in a crypto account are not usually calculated in fiat currencies. Since both the base currency and the quote currency are crypto, this is the case. People used to literally buy and sell BTC/USD back in the day. However, as crypto exchanges grew in popularity and traders started to trade cryptos on a regular basis, crypto pairs (which have both a base and a quote in cryptos) became common. The key reason for its adoption was the high fees associated with squaring off a spot in a fiat currency.

Is it true that crypto pairs with quote currencies as crypto solved the problem of high fees? Yes, indeed. Trading these sets, on the other hand, has a downside. Since both currencies are crypto, the market's volatility rises in tandem, putting traders at greater danger. To address this problem, traders have turned to secure coins such as USDT to alleviate the crypto market's high volatility.

While the introduction of stable coins was a success in that it solved the problems of high fees and high volatility, these coins are said to be vulnerable to market manipulation.

Furthermore, the use of USDT as a settlement currency made the method of calculating results more difficult. As an example, let's say you've decided to use USDT to track your progress. You traded a crypto asset for Bitcoin and closed your spot. Furthermore, the value of that crypto asset has increased while the value of Bitcoin has decreased. You would have theoretically lost money because you exchanged BTC for that crypto asset, and the value of that crypto asset has decreased. However, since the settlement is in USDT, the loss will be compounded because the asset's value has risen towards USDT.

Another group of traders, the majority, prefers to keep their results measured in BTC. They trust and depend on it because of its massive market capitalization and solid fundamentals. They see it as a win-win situation because they assume the value of Bitcoin will remain stable and rise in the long run. If you look closely, you'll notice that this method also has a hint of investing.

• Benchmark comparison

The benchmark comparison is the next step in performance evaluation. There are three types of traders in general. The first group of traders are those whose sole aim is to make a profit on their account within a certain time frame. The second group is those who set a target percentage gain on their account balance for a particular time span. This is where the vast majority of people fall.

• Missed out trades

Let's pretend you outperformed the benchmark. However, in order to maximize your success, you must first identify the opportunities that you have missed. This would allow you to decide if your capital would have grown larger if you had invested it or if you had let it go (simply held in the wallet). Furthermore, it will assist you in better positioning yourself in the business the next time around.

Conclusion

Crypto trading is about more than just making accurate price forecasts. It's a company, so it includes things like plans, risk and money management, and performance monitoring, among other things. People are well trained in the areas of trading strategy and risk management. However, the program is not widely used when it comes to recognizing key success metrics for cryptocurrency trading.