Maximum Drawdown

Having cleared the most basic performance metrics, such as the profit factor, expectancy, and winning percentage, we are now moving forward to the ones that are mostly looked by professionals. The first such metric is the maximum drawdown. The maximum drawdown shows you the "worst-case scenario" that occurred during a…

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Skewness of the returns distribution

Skewness of the returns distribution is not a very popular performance metric. As a matter of fact, you will not find it in most standard performance reports. Regardless of the fact that it is frequently underestimated it is a measure that can give you a better understanding of the trading…

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Sharpe ratio

Sharpe ratio is another performance metric used to evaluate the performance of trading systems. It is used to measure the risk-adjusted returns of a trading strategy. Topics overview: What does the Sharpe ratio show you?Learn more about the original concept of Sharpe ratio and how it is applied to systematic…

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The Equity Curve

One of the best performance indicators actually isn't a metric, but a graph - the equity curve. As the old saying goes "A picture is worth 1000 words". You can easily understand the type of the system and if it is worth trading by a quick glance at the equity…

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Expectancy

Expectancy is another important performance metric you can use to analyze your trading system performance. It builds on top of the winning percentage and helps you evaluate trading systems better. It is a valuable performance metric, but just like the other metrics, it would not show you the full picture.…

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Profit factor

The Profit factor is another valuable metric you should consider together with winning percentage, expectancy, and maximum drawdown when looking at trading system performance reports. Topics overview: What is a good profit factor?Learn to read profit factor stats and how to use them to compare different trading systemsPractical examples

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Winning percentage

The winning percentage, also known as winning rate, shows you what portion of your trades ends up with a positive result. It is a fairly popular trading performance metric, which however is frequently misunderstood. A quite common misconception is that the higher winning percentage is better. Do a simple online…

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Total Gain

The total gain is the second performance metric you should look at when evaluating the performance of a trading system. Most products will allow you to see this metric in money or pips. Our advice is to focus on the pips at this stage of system development. This is because…

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Number of trades

The first important performance indicator you should look at is the number of trades the strategy produces. There are two important reasons for that. The first reason is to estimate the statistical significance of the results. The second reason is to understand the frequency of trading. Estimate the statistical significance…

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