Definition
Average Trade Duration indicates the average time you hold trades open. It provides insight into your trading style—whether you’re a day trader, swing trader, or long-term investor.
Formula
Add up the duration of all your trades and divide by the number of trades.
Average Trade Duration = Total Duration of All Trades / Total Number of Trades
Example 1:
- Total duration of all trades: 500 days
- Number of trades: 100
- Calculation: Average Trade Duration = 500 days / 100 = 5 days
- Interpretation: On average, you hold each trade for 5 days.
Example 2:
- Total duration of all trades: 200 hours
- Number of trades: 50
- Calculation: Average Trade Duration = 200 hours / 50 = 4 hours
- Interpretation: Average holding period is 4 hours per trade.
| How It Can Be Used | Limitations |
|---|---|
| Understanding your trading style | May be skewed by unusually long or short trades |
| Aligning strategies with market volatility | Doesn’t distinguish between winning and losing trades |
| Managing capital allocation and liquidity | May not reflect variability in holding periods |
