# The ratios of an algorithmic trading system

Discover what they are and how to interpret the key ratios of a trading system to select the best trading bots from the wide range of iSystems platform.

ALGORITHMIC TRADING

Javier González-Barros, CFTe

12/15/20232 min read

**The Most Read**

__ __

Manual trading vs Algorithmic trading

How to invest with automated trading systems correctly

Financial Futures and Algorithmic Trading

Classification of trading systems

Paper Trading in the World of Investments

What are the Algorithmic Trading algorithms ?

iSystems: Marketplace for Automated Trading Strategies

__Profit Factor__

__Profit Factor__

The profit factor is the ratio between profits and losses, and its calculated by dividing the sum of profits over the sum of losses.

In our case, as we mark-to-market open positions in order to get a daily P&L on all systems, we use a variation of the clasic Profit Factor formula, where we divide the sum of profits in profitable sessions over the sum of losses in losing sessions.

__TM Rating__

__TM Rating__

A 1 to 3 ranking (3 being highest) based on max drawdown, annual return, and track record length.

__% Time with Open Position__

__% Time with Open Position__

The percentage of time the system has an open trade.

__Slippage per side__

__Slippage per side__

Slippage is the difference between the execution price indicated by the trading algorithm, and the price the trade actually executes at in real accounts. Non live performance is adjusted downwards by a slippage estimate based on the actual slippage amount seen in the same contract traded by real clients on other systems.

__Sharpe / Sortino Ratios__

__Sharpe / Sortino Ratios__

The Sharpe ratio is a risk adjusted return metric measuring return over volatility (compound ROR/annualized volatility). A risk free rate of 0% is used in the calculation. The Sortino ratio is a modification of the Sharpe ratio which measures return over downside volatility only (believing that an investor doesn't mind upside volatility).

__Sterling / MAR Ratios__

__Sterling / MAR Ratios__

The Sterling ratio is a risk adjusted return metric measuring return over drawdown, and uses the average annual drawdown of the system plus a -10% penalty.

The MAR ratio also measures return over drawdown, but simply uses the maximum drawdown as the risk measure.

__Total P/L__

__Total P/L__

The total profit or loss (P/L) over the analyzed period, net of commissions, slippage and license costs.

__Annual ROI__

__Annual ROI__

The total return divided by the number of years in the period (total return = net profit/loss divided by suggested capital).

__Best Session__

__Best Session__

The highest return in a single session over the period analyzed.

__Worst Session__

__Worst Session__

The lowest return in a single session over the period analyzed.

__Analyzed Sessions__

__Analyzed Sessions__

The number of trading sessions in the period (what used to be known as trading days, until the advent of nearly 24 hour electronic trading).

__Winning Sessions__

__Winning Sessions__

The number of trading sessions in the period with returns greater than 0.

__Worst Drawdown__

__Worst Drawdown__

The worst peak to valley loss of the system, as measured on an end of session basis. Between brackets we indicate the session when the lowest point of the worst drawdown happened.

**You might be interested in**

**ABOUT**

**LEGAL**