The ratios of an algorithmic trading system

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

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

% Time with Open Position

The percentage of time the system has an open trade.

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

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

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

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

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

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

Worst Session

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

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

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

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.

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