Profitability Metrics
Core metrics that measure how much money a strategy makes (or loses).
Quick Reference
| Metric | Formula | Unit |
|---|---|---|
| Initial Capital | User-provided starting balance | $ |
| End Balance | Last equity curve point | $ |
| Net Profit | Gross Profit - Gross Loss | $ |
| Net Profit (Points) | Sum of positive P&L points - sum of negative | pts |
| Net Profit (%) | Sum of positive P&L % - sum of negative | % |
| Gross Profit | Sum of all winning trade P&Ls | $ |
| Gross Profit (Points) | Sum of positive P&L in points | pts |
| Gross Profit (%) | Sum of positive P&L in percentage | % |
| Gross Loss | Sum of all losing trade P&Ls (absolute) | $ |
| Gross Loss (Points) | Sum of negative P&L in points (absolute) | pts |
| Gross Loss (%) | Sum of negative P&L in percentage (absolute) | % |
| Total Commissions | Sum of all trade commissions | $ |
| Total Slippage | Sum of all trade slippage | $ |
| Total Return | ((End Balance - Initial Capital) / Initial Capital) × 100 | % |
| Annualized Return | ((1 + Total Return / 100)^(1 / Years) - 1) × 100 | % |
Key Metrics Explained
Net Profit
The bottom line — total dollars earned after all costs. This is gross profit minus gross loss, minus commissions and slippage if tracked separately.
Total Return vs. Annualized Return
Total Return is the cumulative percentage gain over the entire backtest period. A 200% return over 10 years sounds impressive, but the Annualized Return normalizes this to a yearly rate — in this case about 11.6% per year.
Info
Always compare strategies using annualized return rather than total return, especially when backtesting periods differ. A 50% return over 1 year is better than 100% over 5 years.
Gross Profit & Gross Loss
Gross Profit is the sum of all winning trades. Gross Loss is the sum of all losing trades (shown as a positive number). The ratio of these two is the Profit Factor (see Trade Statistics).
Commissions & Slippage
If provided during import, these are tracked separately. They reduce net profit but are broken out so you can see the true cost of trading:
- Commission — Broker fees per trade
- Slippage — Difference between expected and actual fill price
Tip
Always use Annualized Return to compare strategies with different backtest lengths — total return alone is misleading.
Tip
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