In short. Evaluating a strategy by its statistics goes in this order: are there enough trades to draw conclusions, is the expectancy positive, what drawdown had to be endured, how smooth the result was and where it comes from. Win rate alone says nothing — a strategy with 90% winning trades can easily lose money.
1. Are there enough trades
Below 30 trades the result is almost entirely luck. From 50–100 trades you can draw first conclusions, but even then streaks stay long: at a 45% win rate a streak of 7 losses in a row happens at least once in 100 trades in about half of the cases, a streak of 5 — in 92%. A long losing streak alone does not prove the strategy is broken.
2. Expectancy and profit factor
The key question is how much the strategy makes per trade on average. It is easiest to count in R (units of risk to the stop): this way trades of different size are comparable. Expectancy above zero and profit factor above 1 after commissions and swaps is the minimum condition. More in «Trading expectancy» and «Profit factor».
3. Win rate only together with payoff
Example: win rate 90%, average win $20, average loss $250. Expectancy = 0.9 × 20 − 0.1 × 250 = −$7 per trade. A high win rate with rare large losses is the typical picture of grids and averaging down: months of smooth growth, then one loss wipes it all out. Look at win rate only together with the ratio of average win to average loss.
4. Drawdown and recovery time
Maximum drawdown shows what had to be endured for the return. Remember the asymmetry: after −20% you need +25%, after −50% — +100%. Look at recovery time too: a strategy that takes half a year to recover from a drawdown is psychologically almost unbearable. How to calculate it — in «How to calculate account drawdown» and the drawdown calculator.
5. Consistency of the result
- Monthly returns — how many months are positive and whether the whole year rests on a single month.
- Dependence on one trade — if one trade made $2,400 of $3,000 in profit, that is 80% of the result: without it the strategy is near zero.
- Sharpe ratio and Z-score — how smooth the returns are and whether losses cluster into streaks: «Sharpe ratio, Z-score, AHPR and GHPR».
6. Where the result comes from
Break the result down by instrument, setup, day of the week and hour. Often all the profit comes from one instrument or one session, and the rest eats it. Dropping a losing slice is the fastest way to improve a strategy without new ideas.
Red flags
| Sign | What it may mean |
|---|---|
| Win rate above 80%, average loss many times the average win | a grid, averaging down, or losing trades are not closed |
| Trades without a stop, risk per trade jumps around | the result depends on luck, not on rules |
| Most of the profit is one trade or one month | the edge is not proven |
| Losing trades are held longer than winning ones | the stop is moved, losses are «sat through» |
| Equity drawdown much deeper than balance drawdown | floating losses are not realized |
Where to see it all in Davinchu
Account analytics works from the trades of any forex and CFD broker on MetaTrader 4 and 5, prop firms included, as well as Bybit and HTX futures and Bybit spot: growth, drawdown including floating losses, profit factor, expectancy and win rate, monthly returns, Sharpe ratio, Z-score, AHPR and GHPR (Funding in their place for futures), risk of ruin and breakdowns by instrument, hour, day of the week and trade duration. The journal shows results by setup and session, a «What to improve» summary (including whether you hold losing trades longer than winning ones) and a Monte Carlo simulation of future trades from your R values. More on the «Account analytics» page. On the Free plan two accounts connect at no cost.