These are some of the metrics I look at when evaluating a trading system.

The i
nterpretation of these metrics will vary based on the type of system (trend vs.
mean reversion) and the person who's trading. I trade MR and prefer a high winni
ng %. Exposure is not that important, so I don't mind staying in cash as I wait
for signals. I look for systems that have very low volatility and I will even sa
crifice performance if it means I can sleep better at night.
Win% - percentage of trades with a net profit > 0. Above 60% is good. The higher
the better.
Avg%

average percentage return of all trades. Obviously, as high as possible

MaxDD% max. percentage intraday draw down. Important as an isolated number, but
the length of time the DD lasts is just as important. What's worse: A 20% draw d
own that lasts 2 weeks or a 5% draw down that lasts 4 months?
CAR%

annualized percentage return.

RAR% - CAR % divided by exposure%. RAR% takes time into account.

Sharpe Ratio - measures of risk adjusted return of investment. Above 1.0 is good
, above 2.0 is great.
R2 measures the straight line fit of the equity curve. Outcome can be anywhere f
rom 0 to 1. Having a 1 means 100% fit of the equity curve to a straight line. Th
e fewer draw downs the system has the higher R2 .
DVR - combines R2 and Sharpe Ratio by multiplying. This David Varadi's idea; see
his excellent blog.
Recovery Factor - Net Profit divided Max System Draw down. Measures how fast the
system recovers from draw downs. The higher the better, definitely above 2.
Profit Factor - Profit of winners divided by profit of losers. Above 2 is great.
Above 3 is excellent!
Payoff Ratio = average win/average loss. Above 1 please.
Avg. Max Favorable Excursion = MFE is the maximum profit that the trade had befo
re the trade closed. The average gives me an idea of the average positive move t
he trade makes.
Avg. Max Adverse Excursion = MAE is the maximum loss that the trade had before t
he trade closed. The average gives me an idea of the average loss move the trade
makes.
Trades #
number of trades. Important to look at. How often do I have to trade th
is thing to make money?
or
To view the report of last backest simply click Report button in the automatic a
nalysis window. To view results of ALL past backtest, click drop down arrow on t
he Report button and choose Report Explorer option. This will display the Report
Explorer window that will show the list of all backtests performed. If you doub
le click on the line - detailed report will be shown.
New report is hugely enhanced compared to old one. It includes separate statisti
cs for all, long and short sides as well as large number of new metrics. You can
get short help on given figure by hovering your mouse over given field name. Yo
u will see the description in the tooltip. Short explanations are provided also
below:

Exposure % - 'Market exposure of the trading system calculated on bar by bar bas
is. Sum of bar exposures divided by number of bars. Single bar exposure is the v
alue of open positions divided by portfolio equity.
Net Risk Adjusted Return % - Net profit % divided by Exposure %
Annual Return % - Compounded Annual Return % (CAR)
Risk Adjusted Return % - Annual return % divided by Exposure %
Avg. Profit/Loss, also known as Expectancy ($) - (Profit of winners + Loss of lo
sers)/(number of trades), represents expected dollar gain/loss per trade
Avg. Profit/Loss %, also known as Expectancy (%) - '(% Profit of winners + % Los
s of losers)/(number of trades), represents expected percent gain/loss per trade
Avg. Bars Held - sum of bars in trades / number of trades
Max. trade drawdown - The largest peak to valley decline experienced in any sing
le trade. The lower the better
Max. trade % drawdown - The largest peak to valley percentage decline experience
d in any single trade. The lower the better
Max. system drawdown - The largest peak to valley decline experienced in portfol
io equity. The lower the better
Max. system % drawdown - The largest peak to valley percentage decline experienc
ed in portfolio equity. The lower the better
Recovery Factor - Net profit divided by Max. system drawdown
CAR/MaxDD - Compound Annual % Return divided by Max. system % drawdown. Good if
bigger than 2
RAR/MaxDD - Risk Adjusted Return divided by Max. system % drawdown. Good if bigg
er than 2.
Profit Factor - Profit of winners divided by loss of losers
Payoff Ratio - Ratio average win / average loss
Standard Error - Standard error measures chopiness of equity line. The lower the
better.
Risk-Reward Ratio - Measure of the relation between the risk inherent in a tradi
ng the system compared to its potential gain. Higher is better. Calculated as sl
ope of equity line (expected annual return) divided by its standard error.
Ulcer Index - Square root of sum of squared drawdowns divided by number of bars
Ulcer Performance Index - (Annual profit - Tresury notes profit)/Ulcer Index'>Ul
cer Performance Index. Currently tresury notes profit is hardcoded at 5.4. In fu
ture version there will be user-setting for this.
Sharpe Ratio of trades - Measure
0 is good, more than 2.0 is very
rt/sr/sr.htm. Calculation: first
n of returns is calculated. Then

of risk adjusted return of investment. Above 1.

good. More information stanford.edu/~wfsharpe/a
average percentage return and standard deviatio
these two figures are annualized by multipling

them by ratio (NumberOfBarsPerYear)/(AvgNumberOfBarsPerTrade). Then the risk fre

e rate of return is subtracted (currently hard-coded 5) from annualized average
return and then divided by annualized standard deviation of returns.
K-Ratio - Detects inconsistency in returns. Should be 1.0 or more. The higher K
ratio is the more consistent return you may expect from the system. Linear regre
ssion slope of equity line multiplied by square root of sum of squared deviation
s of bar number divided by standard error of equity line multiplied by square ro
ot of number of bars. More information: Stocks & Commodities V14:3 (115-118): Me
asuring System Performance by Lars N. Kestner