Trading Metrics Glossary
The numbers in your journal, in plain English — with formulas and examples
The core metrics in a trading journal each answer a different question. Win rate is the percentage of trades that profit; payoff ratio is how much your average winner makes versus your average loser; expectancy is the average rupees (or R) you can expect per trade; profit factor is gross profit divided by gross loss; an R-multiple measures a trade's result in units of risk; maximum drawdown is the largest peak-to-trough fall in your equity; the Sharpe ratio measures return adjusted for volatility; and streaks are your longest runs of consecutive wins or losses. No single number tells the whole story — read them together.
Win rate
What it is: the percentage of your trades that close in profit.
Formula: winning trades ÷ total trades × 100.
Example: 45 winners out of 100 trades = a 45% win rate.
Why it matters: on its own, win rate is the most misleading number in trading. A 40% win rate can be highly profitable if your winners are much bigger than your losers, and a 70% win rate can still lose money if a few losses are huge. Always read it alongside your payoff ratio and expectancy.
Payoff ratio (reward-to-risk)
What it is: how much your average winning trade makes compared with how much your average losing trade loses. Also called the win/loss ratio or reward-to-risk.
Formula: average win ÷ average loss.
Example: average win ₹3,000, average loss ₹1,500 → payoff ratio of 2.0.
Why it matters: win rate and payoff ratio together decide whether you make money. A low win rate is fine if your payoff ratio is high enough — that's how trend-followers profit while being "wrong" most of the time.
Expectancy
What it is: the average result you can expect from a single trade, averaged over many trades. It's the bottom line of whether your system has an edge.
Formula: (win rate × average win) − (loss rate × average loss). In risk units, it's simply your average R-multiple per trade.
Example: 40% win rate with a ₹3,000 average win, 60% loss rate with a ₹1,000 average loss → (0.40 × 3,000) − (0.60 × 1,000) = 1,200 − 600 = +₹600 expected per trade.
Why it matters: positive expectancy means you make money over time; negative means you lose it no matter how many individual winners you remember. If you track one number, track this one.
Profit factor
What it is: how many rupees you make for every rupee you lose.
Formula: gross profit ÷ gross loss (across all trades).
Example: total profits of ₹60,000 against total losses of ₹40,000 → a profit factor of 1.5.
Why it matters: above 1.0 the system makes money; roughly 1.5–2.0 is solid; below 1.0 it bleeds. It's a quick, position-size-independent health check on a strategy.
R-multiple
What it is: a trade's result expressed in units of risk, where 1R is the amount you risked.
Formula: profit or loss ÷ initial risk.
Example: risk ₹1,000 and make ₹2,400 → +2.4R; get stopped for the full loss → −1R.
Why it matters: R lets you compare every trade on one scale regardless of position size or instrument, so rupee totals can't flatter a lucky oversized bet. See the full guide: What is an R-multiple?
Maximum drawdown
What it is: the largest peak-to-trough decline in your account equity before a new high, usually shown as a percentage.
Formula: (peak equity − lowest equity after that peak) ÷ peak equity × 100.
Example: the account peaks at ₹1,20,000, falls to ₹90,000, then recovers → a maximum drawdown of 25%.
Why it matters: it's the worst losing stretch your strategy has actually put you through. It tells you whether your position sizing — and your nerves — can survive a bad run, because a future drawdown of similar size is almost certain.
Sharpe ratio
What it is: a risk-adjusted return measure — how much return you earn per unit of volatility.
Formula: (average return − risk-free rate) ÷ standard deviation of returns.
Example: two traders both return 30% in a year, but one did it smoothly and the other on a violent rollercoaster. The smoother one has the higher Sharpe ratio.
Why it matters: total return alone hides how much risk you took to get it. A higher Sharpe means more consistent, less stomach-churning returns — and a strategy you're more likely to actually stick with.
Streaks
What it is: your longest runs of consecutive winning or losing trades (maximum win streak and maximum loss streak).
Example: a run of seven straight losses is a max loss streak of 7 — and it's mathematically normal even with a genuine edge.
Why it matters: losing streaks are guaranteed; the question is whether your position size can survive your historical worst, and whether you'll stay disciplined through it instead of abandoning a working system at exactly the wrong moment.
- Win rate + payoff ratio → expectancy, which is whether you have an edge.
- Profit factor → how efficiently the edge converts risk into return.
- Max drawdown + streaks → whether you can survive long enough to collect it.
Seeing these on your own trades
Fenix computes every one of these metrics from the trades you log — win rate, payoff, expectancy, profit factor, R-multiples, drawdown, Sharpe and streaks — alongside your discipline score. No signals, no tips; just your numbers, honestly.
Related: What is an R-multiple? · How to keep a trading journal · What is a discipline score?