Metrics

Performance metrics and statistics used to evaluate trading results.

23 terms in this category

A

Absolute Return

Absolute return is the total gain or loss of an investment expressed as a percentage, without comparison to any benchmark.

Alpha

Alpha measures the excess return of an investment relative to its benchmark, representing the value added by active management or skill.

Average Loss

Average loss is the mean loss amount across all losing trades, calculated by dividing total losses by the number of losing trades.

Average Win

Average win is the mean profit amount across all winning trades, calculated by dividing total profits by the number of winning trades.

B

Batting Average

Batting average in trading is the percentage of trades that result in gains, equivalent to win rate or hit rate.

Beta

Beta measures a security's volatility relative to the overall market, where beta of 1 indicates movement in line with the market.

C

CAGR

Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified time period longer than one year.

Calmar Ratio

Calmar ratio is a risk-adjusted performance metric calculated as CAGR divided by maximum drawdown, measuring return per unit of drawdown risk.

D

Drawdown

Drawdown is the decline from a portfolio's peak value to its lowest point, expressed as a percentage of the peak.

E

Expectancy

Trading expectancy is the average amount a trader expects to win or lose per trade, calculated as (Win Rate × Avg Win) - (Loss Rate × Avg Loss).

I

Information Ratio

Information ratio measures a portfolio's risk-adjusted excess returns against a benchmark, calculated as active return divided by tracking error.

K

Kelly Criterion

Kelly criterion is a mathematical formula that determines the optimal position size to maximize long-term growth while managing risk of ruin.

M

Maximum Drawdown

Maximum drawdown (MDD) is the largest peak-to-trough decline in portfolio value before a new peak is reached, measuring worst-case loss.

P

Payoff Ratio

Payoff ratio is the average winning trade divided by the average losing trade, measuring the relative size of wins to losses.

Profit Factor

Profit factor is the ratio of gross profits to gross losses, calculated as Total Winning Amount / Total Losing Amount.

R

R-Multiple

R-multiple expresses a trade's profit or loss as a multiple of the initial risk (R), where 1R equals the amount risked on the trade.

Recovery Factor

Recovery factor measures how quickly a trading strategy recovers from drawdowns, calculated as net profit divided by maximum drawdown.

Risk of Ruin

Risk of ruin is the probability of losing a predetermined percentage of trading capital given a strategy's win rate and risk parameters.

Risk-Reward Ratio

Risk-reward ratio compares the potential loss (risk) to the potential gain (reward) of a trade, expressed as a ratio like 1:2 or 1:3.

ROI

Return on Investment (ROI) measures the gain or loss generated on an investment relative to its cost, expressed as a percentage.

S

Sharpe Ratio

Sharpe ratio measures risk-adjusted returns by dividing excess return over risk-free rate by standard deviation of returns.

Sortino Ratio

Sortino ratio is a risk-adjusted return metric that only penalizes downside volatility, calculated as excess return divided by downside deviation.

T

Trade Frequency

Trade frequency is the number of trades executed over a given period, affecting commission costs, tax implications, and strategy effectiveness.