A Complete Guide to Quantitative Trading Metrics
The worst part about quantitative trading isn’t having a bad strategy. It’s not knowing whether your strategy is good or bad. A strategy with 30% annualized returns sounds great, until you realize the max drawdown was 60% — you’d never have held through it. A Sharpe ratio of 2.0 looks impressive, but if it’s propped up by a few windfall trades in extreme market conditions, the Sortino ratio will tell a very different story. Metrics aren’t decorations for backtesting reports. They’re the tools that help you decide whether a strategy is worth putting real money behind. ...