Backtesting
Key Metrics Explained
Detailed explanation of every performance metric in the backtest report.
Understanding what each metric means is essential for evaluating your strategy. Here's a comprehensive guide to every metric in the Tradient backtest report.
Return Metrics
- Total Return — Total profit or loss as a percentage of starting capital
- Annualized Return — Return normalized to a one-year period for comparison
- Average Trade Return — Mean return per trade, including winners and losers
Risk Metrics
- Maximum Drawdown — The largest peak-to-trough drop in portfolio value. Under 20% is conservative, 20-30% is moderate, above 30% is aggressive
- Sharpe Ratio — Return per unit of risk. Below 0.5 is poor, 0.5-1.0 is acceptable, 1.0-2.0 is good, above 2.0 is excellent
- Sortino Ratio — Like Sharpe but only considers downside volatility. Generally a more useful measure
- Calmar Ratio — Annualized return divided by maximum drawdown. Higher is better
Trade Metrics
- Win Rate — Percentage of profitable trades. 40-60% is typical for most strategies
- Profit Factor — Gross profit divided by gross loss. Above 1.5 is good, above 2.0 is excellent
- Average Winner vs Average Loser — The ratio between your average winning trade and average losing trade. A ratio above 1.5 means your winners are larger than your losers
- Maximum Consecutive Losses — The longest losing streak. Important for psychological preparation