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The concepts and metrics that separate a tradable strategy from a curve-fit one.
Risk-adjusted return
What is the Sharpe Ratio? A Trader's Guide
The Sharpe ratio measures risk-adjusted return. Learn what it means, how it's calculated, and why a Sharpe of 1.0 is your minimum bar for a tradable strategy.
Read moreThe edge metric
Profit Factor Explained — Gross Wins ÷ Gross Losses
Profit factor is total winning dollars divided by total losing dollars, used as one historical performance metric among others.
Read moreThe pain metric
Max Drawdown — The Number That Decides if You Can Trade the Strategy
Max drawdown is the largest peak-to-trough loss in a strategy's equity curve. If it's bigger than your tolerance, no other metric matters — you'll quit before the strategy recovers.
Read moreThe misleading metric
Win Rate — Why a 40% Win Rate Can Beat a 70% One
Win rate is the percentage of trades that close profitably. By itself it's almost meaningless — what matters is win rate combined with average win and average loss.
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