Trade Efficiency Ratio
A good Trade Efficiency Ratio is 40% or above. Most discretionary day traders average 20–40%. Above 60% indicates elite or scalping-style execution. Below 20% signals chronic entry timing or exit.
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The Formula
TER = (Exit Price − Entry Price) ÷ (Move High − Move Low) × 100 Where: - Exit Price = Price at which the trade was closed - Entry Price = Price at which the trade was opened - Move High = Highest price reached during the holding period - Move Low = Lowest price reached during the holding period For short trades: TER = (Entry Price − Exit Price) ÷ (Move High − Move Low) × 100
Benchmark Ranges
| Level | Range | What It Means |
|---|---|---|
| Excellent | > 60% | Elite or scalping-style execution; capturing the majority of the available move |
| Good | 40% – 60% | Strong execution; above average for discretionary traders |
| Average | 20% – 40% | Typical discretionary day trader; meaningful room for improvement |
| Poor | < 20% | Problematic execution; chronic entry timing or exit discipline issues |
How to Track
Record entry price, exit price, and the high/low of the move during your holding period for every trade
Calculate TER immediately after closing: (Exit − Entry) ÷ (High − Low) × 100 for longs; flip the numerator for shorts
Tag each trade by exit type — target hit, manual close, stop-out — to enable segmented TER analysis
Track a 30-trade rolling average monthly; a rising TER over 90 days signals improving trade management before win rate or P&L reflect the change
How to Improve
Enter at confirmed levels rather than in anticipation — waiting for price to actually touch the breakout or support zone moves your entry closer to the move's starting point, directly raising TER
Set price targets before entering — identifying resistance or a measured-move target at entry prevents reactive, premature exits that cut efficiency below 30%
Filter out chasing entries by requiring your fill to be within 0.25% of the setup trigger price; late entries structurally cap TER because the early portion of the move is already gone
Segment TER by exit type — if manual closes average 18% but target exits average 52%, the problem is premature manual intervention, not the strategy itself
Trade Efficiency Ratio (TER) measures how much of an available price move a trader actually captured, expressed as a percentage of the total move from the period low to the period high. It isolates execution quality from outcome — a trade can be profitable and still show poor efficiency if the entry was late or the exit came before the move peaked. Unlike win rate or profit factor, which measure outcomes, TER is the only metric that diagnoses whether a profitable strategy is being systematically under-executed by the trader running it.
Formula & Calculation
TER = (Exit Price − Entry Price) ÷ (Move High − Move Low) × 100
Where:
- Exit Price = Price at which the trade was closed
- Entry Price = Price at which the trade was opened
- Move High = Highest price reached during the holding period
- Move Low = Lowest price reached during the holding period
For short trades, flip the numerator: TER = (Entry Price − Exit Price) ÷ (Move High − Move Low) × 100
The denominator captures the total opportunity: the full price range that existed while the trade was open. The numerator captures what the trader actually took. A long trade entering at the exact low and exiting at the exact high achieves 100% — theoretically possible, practically irrelevant as a target. The actionable goal is consistent execution above 40%. Scores are calculated separately for long and short trades; mixing the two directions without adjusting the formula produces meaningless results.
Benchmarks
| Level | Range | What It Means |
|---|---|---|
| Excellent | above 60% | Elite or scalping-style execution; capturing the majority of available moves |
| Good | 40% – 60% | Strong execution; above average for discretionary traders |
| Average | 20% – 40% | Typical discretionary day trader; meaningful room for improvement |
| Poor | below 20% | Problematic execution; chronic entry timing or exit discipline issues |
Note that scalpers and swing traders have structurally different TER profiles. Compare within strategy type, not across them.
Practical Example
A trader buys AAPL at $185.20 after a confirmed breakout signal. During the holding period, AAPL trades from a low of $184.80 to a high of $187.60 — a total available move of $2.80. The trader exits at $186.40, capturing $1.20.
TER = ($186.40 − $185.20) ÷ ($187.60 − $184.80) × 100 = $1.20 ÷ $2.80 × 100 = 42.9%
At 42.9%, this trade falls in the Good range — above the average discretionary threshold.
Now compare: the same trader on a different day enters AAPL at $185.80 (a late, chasing entry after the breakout was already underway) and exits at $186.20. Same stock, same $2.80 move. Captured profit: $0.40.
TER = ($186.20 − $185.80) ÷ ($187.60 − $184.80) × 100 = $0.40 ÷ $2.80 × 100 = 14.3%
At 14.3%, this falls in the Poor range. The stock did exactly what the strategy predicted — the only difference was execution. Over 50 trades with 100-share lots, the gap between 42.9% and 14.3% efficiency compounds to $4,000 in additional captured profit on identical market opportunities.
How to Track Trade Efficiency Ratio
- Record the holding-period range — log entry price, exit price, and the high and low of the move during your specific holding period (not the full-day range) for every trade.
- Calculate TER at close — compute (Exit − Entry) ÷ (High − Low) × 100 for longs and (Entry − Exit) ÷ (High − Low) × 100 for shorts immediately after each trade.
- Tag by exit type — mark each trade as target hit, manual close, or stop-out so you can run segmented TER analysis across exit categories.
- Track the 90-day rolling average — a rising TER trend over 90 days is a leading indicator of improving trade management, often visible weeks before win rate or P&L show any change.
How to Improve Trade Efficiency Ratio
- Enter at confirmed levels, not in anticipation — waiting for price to actually tag the breakout level or support zone rather than entering 0.3% early moves your fill closer to the move’s origin, directly increasing the numerator.
- Set exit targets before entering — identifying a resistance level or measured-move target at trade entry prevents reactive exits that cut efficiency below 30%; planned exits consistently outperform emotional ones.
- Filter out chasing entries — if your fill is more than 0.25% above the trigger price on a long setup, pass on the trade. Late entries structurally cap TER because the early portion of the move has already occurred.
- Act on segmented TER data — if manual closes average 18% efficiency but target exits average 52%, the fix is letting trades run to their planned targets, not changing the entry criteria. That single diagnostic is worth more than any rule adjustment.
Common Mistakes
- Comparing TER across strategy types — a swing trader at 30% efficiency on a 5-day trend may be executing well; a scalper at 30% on a 15-minute range is underperforming. Always benchmark against traders using the same strategy, timeframe, and market.
- Using the full-day range as the denominator — if you held from 9:45am to 10:30am, use the high and low during that 45-minute window. Using the full session range inflates the denominator and produces a misleadingly low TER that doesn’t reflect actual execution quality.
- Skipping the short-trade formula adjustment — applying the long formula to a short trade produces a negative TER even on a profitable trade. Always flip the numerator: (Entry − Exit) for shorts.
- Over-indexing on a single trade — one trade at 80% efficiency is noise. TER is only meaningful as a 30-trade or longer average; individual results vary widely based on where exactly the move started and ended relative to fills.
How JournalPlus Calculates Trade Efficiency Ratio
JournalPlus automatically calculates Trade Efficiency Ratio for every logged trade using the entry price, exit price, and the high/low of the holding period recorded in your trade log. The analytics dashboard displays TER as both a per-trade value and a rolling 30-trade average, segmented by exit type — target hits, manual closes, and stop-outs — so you can pinpoint exactly where efficiency is lost. Performance charts overlay your TER trend against maximum favorable excursion and realized R:R vs. planned R:R, making it immediately visible when execution quality improves before it shows up in dollar returns. You can filter the trade log by date range, setup tag, or symbol to isolate TER for a specific strategy or market condition and compare it against your edge ratio to build a complete picture of execution quality.
Common Mistakes
Comparing TER across strategy types — scalpers and swing traders have structurally different TER profiles; a swing trader at 30% on a 5-day trend may be executing well, while a scalper at 30% on a 15-minute range is significantly underperforming
Using the full-day range instead of the holding-period range — if a position was held from 9:45am to 10:30am, use the high and low during that 45-minute window, not the entire session range, which inflates the denominator and artificially deflates TER
Skipping the formula adjustment for short trades — applying the long formula to a short produces a negative TER even on a winning trade; for shorts always use (Entry − Exit) ÷ (High − Low) × 100
Treating a single high-TER trade as validation — one trade at 80% efficiency is noise; the metric is only actionable as a 30-trade or longer average where individual randomness evens out
Frequently Asked Questions
What is a good Trade Efficiency Ratio?
A TER of 40% or above is considered good for discretionary day traders. Most retail traders average 20–40%. Scalpers often reach 50–70% on tighter ranges, while swing traders capturing multi-day trends commonly fall in the 25–35% range — both can be excellent execution for their respective styles.
How is Trade Efficiency Ratio different from R-multiple?
R-multiple measures the outcome of a trade relative to initial risk. TER measures the quality of execution — how much of the price move you actually captured. A trade can show a positive R-multiple but poor TER if the trader exited well before the move peaked, meaning the strategy is under-executed even when profitable.
Should I calculate TER differently for short trades?
Yes. For short trades, TER = (Entry Price − Exit Price) ÷ (Move High − Move Low) × 100. The numerator flips because profit on a short comes from price declining. Using the long formula on a short trade produces a negative or nonsensical result.
What does a TER below 20% indicate?
Consistent TER below 20% signals either chronic late entries (missing the early part of the move), premature exits (closing before the move completes), or both. Segmenting by exit type — target hit, manual close, stop-out — isolates which problem dominates so you can address the root cause.
Can Trade Efficiency Ratio be negative?
Yes, on losing trades. A negative TER means the exit moved against the entry direction, so the trader captured nothing and lost ground. Tracking TER on losing trades separately reveals stop placement quality and how far trades moved against you before being closed.
How many trades do I need for a meaningful TER average?
At least 30 trades in a consistent strategy and market condition. Fewer trades produce averages too volatile to act on. A 90-day rolling average provides the most reliable signal for identifying genuine improvement trends.
Why does a trader with lower win rate sometimes outperform one with higher win rate?
TER explains part of this. A trader with a 35% win rate but 55% average TER captures more of each winning move than a trader with a 55% win rate and 22% TER who exits early. The higher-TER trader extracts more dollars per opportunity even though they win less often.
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