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Trading metrics glossary

32 terms, each with the formula, a worked example computed on a real 96-trade statement, and — the part most glossaries skip — an explicit list of what the number does not tell you.

Two of these, the Sharpe ratio and SQN, are not displayed anywhere in TapeSheet. Their pages explain why and show the arithmetic anyway, because “we do not show this, and here is what it would say” is more useful than a gap.

Is there an edge?

The numbers that between them describe whether a record makes money, and how. None of them means anything alone.

• Profit factorGross profit divided by gross loss — how many currency units you made for every one you lost.
• Expectancy (Expected value per trade, Average trade)The average amount you win or lose per trade, across every trade — the arithmetic mean of your results.
• Win rate (Strike rate, Percent profitable)The share of your closed trades that finished in profit.
• Average win / average loss ratio (Payoff ratio, Win/loss ratio)Your average winning trade divided by your average losing trade — how much bigger a typical win is than a typical loss.
• Break-even win rate (Required win rate, Minimum win rate)The win rate a given reward-to-risk needs just to stand still — and the number that settles most arguments about win rates.
• Risk-reward ratio (Reward-to-risk, R:R)How far your target sits from entry compared with how far your stop does — the other half of the win-rate question.

What did it cost to get?

Risk and drawdown — the constraint that decides whether an edge ever survives long enough to arrive.

• Maximum drawdown (Max DD, Peak-to-trough drawdown)The largest fall from a peak in your account to the lowest point that followed it, before a new peak was made.
• Absolute drawdownHow far below your STARTING balance the account ever fell — a different question from maximum drawdown, and the one that matters at the beginning.
• Recovery factorNet profit divided by maximum drawdown — how many times over the account earned back its own worst fall.
• R-multiple (R, Risk multiple)A trade result expressed as a multiple of the money you planned to risk on it — a +2R trade made twice what you were prepared to lose.
• Losing streak (Consecutive losses, Drawdown run)The longest run of consecutive losing trades in a period — the thing that ends accounts, and the thing every win rate guarantees you will meet.
• Position sizing (Lot sizing, Trade size)Deciding how many lots to trade from how much you are willing to lose — the single decision that most determines whether an edge survives long enough to pay.
• Stop-loss (Stop, S/L)A resting order that closes a position at a level you chose in advance — the thing that turns an unknown loss into a decided one.

The money itself

The totals underneath every ratio, and the balance-versus-equity distinction that decides what a statement can honestly show.

• Net profit (Net P&L, Total net profit)Everything you made minus everything you lost, after commission and swap — the bottom line of a period, and the least informative number on the dashboard.
• Gross profit and gross loss (Total profit, Total loss)The two totals underneath every ratio on the dashboard — winners summed on one side, losers on the other, before they are combined.
• Equity curve (Balance curve, Account curve)Your account balance plotted against time — the single chart that shows how a result was arrived at rather than what it was.
• Balance vs equity (Floating P&L, Account equity)Balance counts only closed trades; equity adds the floating profit and loss on everything still open. The gap between them is what a statement cannot show you.

What trading actually costs

Three costs, of which your statement records two. The one it misses is often the largest.

• CommissionThe per-trade fee an ECN or raw-spread account charges instead of widening the spread — a visible cost, recorded in your statement, and the only one that is.
• Swap (Rollover, Overnight financing)The interest credited or debited for holding a position past the daily rollover — small on one night, decisive on a position held for weeks.
• SpreadThe gap between the bid and the ask — the cost you pay on entry, and the only major trading cost your statement does not record as a line.
• SlippageThe difference between the price you expected to trade at and the price you actually got.

Composites and scores

Single numbers that try to summarise a record — including two we deliberately do not display.

• Tape ScoreTapeSheet’s own 0–100 composite of six weighted sub-scores, one of which is how many trades it had to work with — published in full, because a secret score is worthless.
• SQN (System Quality Number) (System Quality Number, Van Tharp SQN)Van Tharp’s measure of system quality: mean result divided by the standard deviation of results, multiplied by the square root of the number of trades.
• Sharpe ratioReturn per unit of volatility — excess return divided by the standard deviation of returns, usually annualised.

Units and mechanics

What the numbers on your statement are denominated in, and what your broker permits you to do with them.

• Pip (Point in percentage, Pipette (one tenth of a pip))The standard smallest price increment for a currency pair — 0.0001 for most, 0.01 for pairs quoted against the yen.
• Lot (Standard lot, Mini lot)The unit of position size in forex — one standard lot is 100,000 units of the base currency.
• Leverage (Gearing, 1:100)The ratio between the size of a position and the margin it requires — a limit on what you may open, and not, by itself, a measure of risk.
• Margin (Used margin, Required margin)The portion of your balance reserved while a position is open — your own money, moved from free to used, and returned in full when you close.
• Margin call (Stop-out, Margin level warning)The point at which your equity has fallen far enough against your used margin that the broker warns you — and, a little further down, closes your positions for you.

Patterns in the record

Breakdowns that occasionally reveal something real — and are unusually easy to over-fit.

• Trading session (London session, New York session)The regional market hours a trade falls into — and one of the few breakdowns where a statement usually shows a real, actionable difference.
• Holding time (Time in trade, Trade duration)How long positions stay open — the number that decides which costs matter, and the fastest way to catch a gap between the strategy you describe and the one you trade.
• Prop firm challenge (Evaluation, Funded account challenge)A paid evaluation with a profit target and two drawdown limits, where the limits — not the target — decide almost every outcome.

Why the caveats are the point

Every metric on this list is a compression, and every compression throws something away. Drawdown computed from a statement is smaller than the one you lived through. Win rate can be raised by doing something actively harmful. A Sharpe ratio calculated on closed trades produces a number that would embarrass a hedge fund. None of that is a reason not to use the metrics — it is a reason to know what each one dropped on the floor.

TapeSheet prints those caveats next to the numbers themselves rather than in a footer, and these pages are the long version of the same habit. If you find one that is wrong, thecontact page is open.