Trading Education
Trading Metrics Explained: Sharpe Ratio, Profit Factor, Calmar, and More
10 min readApril 2026
Every analytics platform, leaderboard, and track record report throws metrics at you. Sharpe ratio, profit factor, Calmar ratio, expectancy. Most traders glance at total return and ignore the rest. That's a mistake.
These metrics exist because total return alone is misleading. A 100% return means nothing if it came with a 60% drawdown. A 20% return with 5% max drawdown is far more impressive and far more likely to continue.
This guide explains each metric in plain English, shows you what good looks like, and tells you when each metric matters most.
Return Metrics
Total Return
(Current Equity - Starting Equity) / Starting Equity x 100
The most basic metric. How much your account has grown in percentage terms. Useful as a headline number but tells you nothing about risk, consistency, or sustainability. Two traders with 50% total return can have wildly different risk profiles.
By itself: incomplete
Combined with drawdown: useful
Monthly Return (Compounded)
Product of (1 + each monthly return) - 1
Your real return accounting for compounding. A -10% month followed by a +10% month doesn't get you back to zero. It leaves you at -1%. Compounded monthly return captures this reality. This is the number that should match your equity curve.
Negative: losing money
0-3%/mo: moderate
3-8%/mo: strong
8%+/mo: verify over 12+ months
Risk Metrics
Maximum Drawdown
Largest peak-to-trough decline in equity (%)
The worst drop your account experienced from a high point to a low point. This is the number that tells you the most about risk. A 30% max drawdown means at some point, you would have seen nearly a third of your account disappear. Could you sit through that without changing your strategy?
Under 10%: low risk
10-20%: moderate risk
20-30%: elevated risk
30%+: high risk
Win Rate
Winning trades / Total trades x 100
The percentage of trades that close in profit. On its own, win rate is meaningless. A 90% win rate with tiny wins and massive losses is a losing strategy. A 30% win rate with huge wins and small losses can be highly profitable. Always pair win rate with average win/loss ratio.
Depends entirely on R:R ratio
Risk-Adjusted Metrics
These are the metrics professionals use. They measure return relative to risk, which is the only meaningful way to compare traders.
Sharpe Ratio
(Average Return - Risk-Free Rate) / Std Deviation of Returns
The gold standard of risk-adjusted performance. It answers: how much return am I getting for each unit of volatility? A Sharpe of 2.0 means returns are twice the volatility. Higher is better. In trading, the risk-free rate is often simplified to 0 for monthly calculations.
Below 0.5: weak
0.5-1.0: acceptable
1.0-2.0: good
2.0+: strong
Profit Factor
Gross Profits / Gross Losses
Total dollars won divided by total dollars lost. A profit factor of 2.0 means you make $2 for every $1 you lose. Simple, intuitive, and hard to manipulate. One of the best single metrics for evaluating a trading strategy.
Below 1.0: losing money
1.0-1.5: thin edge
1.5-2.5: solid edge
2.5+: strong edge
Calmar Ratio
Annualised Return / Maximum Drawdown
Measures return relative to worst-case pain. A Calmar of 2.0 means the annualised return is twice the max drawdown. This is particularly useful for evaluating how well a trader recovers from bad periods. High Calmar = strong recovery ability.
Below 0.5: poor recovery
0.5-1.0: moderate
1.0-2.0: good
2.0+: excellent
Expectancy
(Win Rate x Avg Win) - (Loss Rate x Avg Loss)
The average dollar amount you expect to make per trade. Positive expectancy means the strategy makes money over time. This combines win rate and reward-to-risk into a single number. Multiply by trade count to estimate monthly income.
Negative: losing system
$0-50: thin edge
$50-200: solid edge
$200+: strong edge (verify sample size)
Health Score
Account Health Score
Composite of multiple metrics (platform-specific)
CopyOptic combines several metrics into a single health score from 0-100. It factors in Sharpe ratio, max drawdown, profit factor, consistency, and equity curve trend. A single number that tells you whether an account is healthy, at risk, or in trouble. Useful for quick screening before diving into individual metrics.
0-40: at risk
40-60: needs attention
60-80: healthy
80-100: excellent
No single metric tells the full story. Always look at 3-4 metrics together. A high Sharpe with high drawdown suggests the drawdown was short-lived (good recovery). A low Sharpe with low drawdown might just be a very conservative strategy with thin returns. Context matters.
How to Use These Metrics
Evaluating your own trading: Track Sharpe ratio and max drawdown monthly. If Sharpe is declining or drawdown is increasing, your edge may be weakening. Adjust risk before the numbers get worse. Use the Risk of Ruin Calculator to stress-test your current stats.
Choosing a copy trading provider: Filter by Sharpe > 1.0, max drawdown < 20%, profit factor > 1.5, and track record > 6 months. This eliminates 80% of providers and leaves you with the statistically strongest options. See our detailed guide on evaluating copy trading providers.
Monitoring a prop firm challenge: Daily drawdown and max drawdown are the critical metrics during a challenge. Profit factor and consistency matter for meeting firm rules. Use the Prop Tracker to monitor all of these in real time.
See Your Metrics in Real Time
Connect your trading account and get instant access to every metric on this page, calculated automatically from your actual trade data. Sharpe ratio, profit factor, Calmar, drawdown, equity curves, and more.
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Summary
Total return alone is misleading. Risk-adjusted metrics tell you whether returns are sustainable. The essentials: Sharpe ratio measures return per unit of risk, profit factor measures dollars won per dollar lost, max drawdown measures worst-case pain, and Calmar measures recovery ability. Use 3-4 metrics together to evaluate any trading account, including your own.