Complete reference for all backtesting performance metrics including formulas, interpretations, and benchmarks.
The total percentage gain or loss over the entire backtest period.
(Final Equity - Initial Capital) / Initial Capital × 100
Example: $100,000 → $125,000 = 25% Total Return
The rate of return that would compound to produce the final equity. More accurate than simple annualized return.
(Final Equity / Initial Capital) ^ (1/Years) - 1
Good: >10% per year | Great: >15% per year
Measures return per unit of risk. Higher is better.
(Return - Risk-Free Rate) / Volatility
Like Sharpe, but only penalizes downside volatility (losses), not upside.
Typically higher than Sharpe since it ignores positive volatility. Good: >1.0
Return per unit of maximum drawdown. Measures return vs worst-case loss.
Annualized Return / Max Drawdown
Good: 1-3 | Excellent: >3
The largest peak-to-trough decline in equity. Critical for risk assessment.
Good: <15% | Acceptable: 15-25% | High Risk: >30%
Standard deviation of returns. Measures how much returns fluctuate.
Low: <15% | Medium: 15-30% | High: >30%
Percentage of profitable trades. Important but not definitive.
Good: >50% | Note: Can be profitable with <50% if winners are larger
Total gains divided by total losses. Must be >1.0 to be profitable.
Sum of All Wins / Sum of All Losses
Acceptable: 1.2-1.5 | Good: 1.5-2.0 | Excellent: >2.0
How long positions are held on average. Helps classify strategy type.
