A quick guide to reading backtest metrics — what each number means and what makes a good result.
Profit Factor (PF)
What is it? Total gross profit divided by total gross loss. A PF of 1.93 means the system earns $1.93 for every $1.00 it loses.
Good range: Above 1.5 is good. Above 2.0 is excellent. Below 1.0 means net loss.
Our result: U30USD leads at 1.93, SPXUSD at 1.60, NASUSD at 1.20 (typical for high-frequency trend systems).
Sharpe Ratio
What is it? Measures return per unit of risk. Higher = more reward for the same amount of risk taken.
Good range: Above 1.0 is acceptable. Above 3.0 is excellent. Above 10.0 is exceptional.
Our result: U30USD at 15.12 and SPXUSD at 12.47 — both in exceptional territory, reflecting consistent returns with low volatility.
Max Drawdown (DD)
What is it? The largest peak-to-trough decline during the backtest. Represents the worst-case scenario an investor would have experienced.
Good range: Below 15% is good for leveraged trading. Below 10% is excellent. Buy-and-hold stocks typically experience 20-50%+ drawdowns.
Our result: SPXUSD at 11.85% and U30USD at 12.38% — well controlled even through the 2025 tariff volatility.
Recovery Factor
What is it? Net profit divided by max drawdown. Measures how quickly the system recovers from its worst period.
Good range: Above 2.0 means net profit is at least 2× the worst drawdown. Above 3.0 is excellent.
Our result: U30USD leads with 3.81 — its $6,538 profit is 3.8× the $1,716 max drawdown amount. This means the system earned back its worst-case loss nearly 4 times over.
Win Rate
What is it? Percentage of trades that closed in profit. Does not indicate profitability alone — must be combined with risk-reward ratio.
Good range: For mean reversion: 55-80%. For trend-following: 40-60% (larger wins compensate for lower hit rate).
Our result: U30USD at 76.52% (mean reversion, high precision). NASUSD at 59.22% (trend-following, normal). U30 shorts hit 91.67% — 11 out of 12 short trades profitable.
LR Correlation
What is it? Linear Regression Correlation of the equity curve. Measures how smooth and consistent the growth is over time (0.0 = random, 1.0 = perfectly straight line upward).
Good range: Above 0.90 is excellent. Above 0.70 is good. Below 0.50 indicates erratic returns.
Our result: NASUSD at 0.887 (smoothest growth), U30USD at 0.758, SPXUSD at 0.717 — all showing consistent upward equity curves rather than lucky spikes.
What Makes This Portfolio Special?
Most individual trading strategies excel in some metrics but suffer in others. By combining three instruments with two different strategy types (trend + mean reversion), this portfolio achieves diversification across strategy, instrument, and market condition. When NASDAQ trends strongly, the trend-following engine captures those moves. When markets chop and reverse, the mean reversion engines on U30 and SPX harvest gains. The result: more consistent combined returns than any single instrument alone.