Money Management Indicators by Michael R. Bryant, Ph.D.
Keeping track of your systemís performance will alert you to changes in market behavior.
T raditional market indicators are typically based on price. Moving averages, for example, are calculated using a specific number of bars of price history. Traditional indicators can be useful for gauging price action in the market, but I wanted indicators to measure how my system was performing. So I tried out a combination of indicators based on the profit/loss stream of a trading system.
These money management indicators are plotted on a price chart just as any other indicators. But instead of being used to analyze the market, they analyze trading systems and provide information about how a trading system is responding to the market. They are particularly useful for risk and position management. In effect, money management indicators are derivative indicators, since they are based on how the trading system responds to the market rather than on the market itself.