Matthew Thomas K Williams

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What role do performance attribution and benchmarking play in forex trading?

Performance attribution breaks down profits into sources: strategy edge, timing, or market beta. Institutions benchmark against risk-free rates or indexes. Retail traders can benchmark against simple buy-and-hold returns in currency ETFs. Benefits: clarity about what truly drives performance. Risks: without benchmarking, traders may overestimate skill. For example, profiting during a strong USD trend may just be beta, not true edge. Attribution and benchmarking reveal whether success is due to genuine strategy or favorable conditions.