TradingBarrioOpen platformBacktesting Metrics: Win Rate, Expectancy, and Drawdown
A strategy with a high win rate can still lose money, while a lower-win-rate strategy can have positive expectancy. Metrics must be evaluated together and with enough observations.
Win rate
Win rate is the percentage of completed trades that finish positive. It says nothing by itself about the size of wins relative to losses.
Expectancy
Expectancy combines win probability, average win, loss probability, and average loss into an estimated average outcome per trade before uncertainty and future regime change.
Drawdown
Drawdown measures decline from a prior peak. Both depth and duration matter because a strategy can be mathematically profitable yet operationally or psychologically difficult to continue.
Sample stability
Break results into time periods, market conditions, and instruments. If all performance comes from one short episode or a few trades, the aggregate statistics are fragile.
Preparation checklist
- Calculate win rate
- Compare average win and loss
- Estimate expectancy
- Measure maximum drawdown
- Check subperiod stability
Frequently asked questions
Is a 70% win rate good?
It cannot be judged without average win, average loss, costs, and drawdown.
Can expectancy predict the future?
It summarizes the tested sample; future market behavior can differ.