The Metrics That Matter
Not all metrics are created equal. Focus on these.
Win Rate
Wins / Total Trades
If you took 10 trades and won 6: 60% win rate.
- 40% win rate: Respectable if you have 1:2+ risk:reward
- 50% win rate: Excellent, means strong consistency
- 60%+ win rate: Professional level
Don't target win rate above 50% unless you're very skilled. Most successful traders win 40-50% of trades.
Profit Factor
Gross Profit / Gross Loss
If you made $5,000 and lost $2,500: 2.0 profit factor.
- Below 1.5: You're losing money over time
- 1.5-2.0: Breaking even to modest profit
- 2.0-3.0: Excellent, sustainable
- 3.0+: Exceptional, verify it's real
Average R:R (Risk:Reward)
Average win $ / Average loss $
If you average $500 wins and $250 losses: 1:2 ratio.
This is the compounding multiplier. A 1:2 ratio means you only need 35% wins to be profitable long-term.
Expectancy
(Win % × Average Win) - (Loss % × Average Loss)
The $ you expect to make per trade on average.
Positive expectancy = Profitable strategy.
Example: 50% win, $400 avg win, 50% loss, $300 avg loss = (0.50 × $400) - (0.50 × $300) = $200 - $150 = $50 expectancy per trade
Max Drawdown
Largest peak-to-trough decline
If your account went from $10K to $7K at its worst: 30% drawdown.
- 10-20% drawdown: Most traders can handle
- 20-30% drawdown: Tests your psychology
- 30%+: Many traders blow up here
Know your max drawdown tolerance before trading live.
Sharpe Ratio
Return per unit of risk taken
A stock market average is ~1.0. A 2.0+ Sharpe ratio is excellent for trading.
Higher = better risk-adjusted returns.
Consecutive Losses
The longest losing streak
If your worst run was 5 losses in a row: 5 consecutive losses.
- Know this number
- Prepare mentally for it happening again
- Have a plan for recovery
Trade Duration
Average time in a trade
Day traders might average 30 minutes. Swing traders, 3 days.
Make sure your strategy matches your intended timeframe.
Which Metrics Matter Most
In order:
- Positive expectancy — Your edge exists
- Profit factor — 1.5+ is sustainable
- Max drawdown — Can you handle it?
- Consistency — Smooth equity curve, not erratic
Don't chase a 70% win rate. Chase positive expectancy.