Core Performance Metrics
Win Rate
The percentage of trades that closed in profit.
Formula: (Winning Trades ÷ Total Trades) × 100
Note: Win rate alone is meaningless without knowing the average size of wins vs. losses.
Profit Factor
The ratio of gross profit to gross loss.
Formula: Total Gross Profit ÷ Total Gross Loss
Benchmark: Above 1.5 is solid; above 2.0 is strong. Below 1.0 means net losing.
Expectancy
The average expected return per trade.
Formula: (Win Rate × Average Win) − (Loss Rate × Average Loss)
Interpretation: A positive expectancy means the strategy is profitable on average. The magnitude tells you how much.
R-Multiple
How many times your initial risk did you win or lose on a trade.
Formula: Trade P&L ÷ Initial Risk (stop distance × position size)
Examples: +2R means you won twice your risk; −1R means you lost your full risk amount.
Profit/Loss Ratio (Reward:Risk)
The ratio of average winning trade to average losing trade.
Formula: Average Win ÷ Average Loss
Example: 2.0 means your average winner is 2× your average loser.
Risk Metrics
Maximum Drawdown
The largest peak-to-trough decline in your equity over a measured period.
Formula: (Peak Equity − Trough Equity) ÷ Peak Equity × 100
Benchmark: Below 10% for retail traders is conservative; above 20% requires attention.
Sharpe Ratio
Return adjusted for volatility — how much return you're generating per unit of risk.
Formula: (Average Return − Risk-Free Rate) ÷ Standard Deviation of Returns
Benchmark: Above 1.0 is acceptable; above 2.0 is excellent for trading strategies.
Calmar Ratio
Annual return divided by maximum drawdown.
Formula: Annualized Return ÷ Maximum Drawdown
Useful for comparing strategies or time periods.
Risk of Ruin
The probability of losing a defined percentage of capital (usually the amount that would end your trading career). Increases non-linearly with position size.
Trade Execution Metrics
Maximum Adverse Excursion (MAE)
How far against you did a trade move at its worst point before you exited.
Useful for: Optimizing stop placement; identifying if stops are too tight.
Maximum Favorable Excursion (MFE)
How far in your favor did a trade move at its best point before you exited.
Useful for: Identifying premature exits; optimizing target placement.
Holding Period
The time between entry and exit. Analyzed in aggregate to find optimal hold durations for each setup.
Consistency Metrics
Equity Curve Smoothness
How steady the equity growth is. Measured by the angle and standard deviation of the equity curve. Smooth upward curves indicate consistent edge; jagged curves indicate variance.
Sortino Ratio
Similar to Sharpe Ratio but penalizes only downside volatility (not upside).
Formula: (Average Return − Risk-Free Rate) ÷ Downside Standard Deviation
Recovery Factor
How quickly you recover from drawdowns.
Formula: Net Profit ÷ Maximum Drawdown
Higher is better — indicates the strategy generates enough return relative to its worst period.