Metrics
Performance metrics and statistics used to evaluate trading results.
Performance metrics and statistics used to evaluate trading results.
33 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 Holding Time
Average holding time is the mean duration a trader holds open positions, calculated as total hold time divided by trade count, from fill to close.
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
C
E
Equity Curve
Equity curve is a line chart of cumulative account value over time, showing whether a trading strategy produces consistent gains or erratic, luck-driven results.
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).
M
Maximum Adverse Excursion (MAE)
Maximum Adverse Excursion (MAE) is the largest unrealized loss a trade experiences at any point before closing, used to set data-driven stop-loss levels.
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.
Maximum Favorable Excursion (MFE)
Maximum Favorable Excursion (MFE) is the largest unrealized profit a trade achieves at any point between entry and close, used to diagnose exit efficiency.
Maximum Favorable Excursion (MFE)
Maximum Favorable Excursion (MFE) is the highest unrealized profit a trade reaches before it is closed — the peak paper gain during the trade's lifetime.
Monte Carlo Simulation for Trading Strategies
Monte Carlo simulation is a technique that runs thousands of randomized sequences of historical trade results to model the range of possible equity curves, drawdowns, and ruin probability.
P
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.
Standard Deviation
Standard deviation is a statistical measure of how spread out a security's returns are around their mean, quantifying volatility and powering tools like Bollinger Bands and options pricing.
System Quality Number (SQN)
System Quality Number (SQN) is a metric by Van Tharp: √(N) × mean(R) ÷ stdev(R), scoring a trading system's edge, consistency, and sample size in one number.