I just realized that many newcomers to the market don't understand what alpha is, even though it is an extremely important concept. Today, I want to explain it in the simplest way possible.

Actually, what alpha is just a way for you to know whether your trading or investing is better than the market. More specifically, alpha measures the degree of outperformance of an investment compared to the average return of the entire market.

Let me give a simple example: you buy a stock and it goes up 10%, but the market only increases by 7%. So your alpha is +3%. That means you performed 3% better than the market. Conversely, if you gain 5% while the market gains 7%, alpha is -2%, meaning you underperformed.

Why is this important? Because it shows whether you truly have trading skills. Positive alpha = you know how to select, negative alpha = you need to improve your strategy. Large fund managers are always evaluated based on their alpha.

The calculation is also not complicated: Alpha = Actual return - Expected return from the market. Depending on the result, you can tell where you stand.

In daily trading, especially in crypto or futures, all traders are looking for what alpha is to prove their skills. If you consistently beat the average return, you are generating real alpha.

By the way, people often hear Alpha and Beta together. Alpha is skill, superior profit. Beta is risk, the level of volatility compared to the market. Both help you better understand your investment performance.

The conclusion is that understanding what alpha is will help you more accurately assess whether you are truly skilled or just lucky. Whether you are a small investor or a professional trader, tracking alpha will help you improve your strategy and make smarter decisions.