7. Understanding Results
Interpret backtesting and live performance metrics.
The TradingView Strategy Tester produces several metrics that help evaluate an algorithm's historical performance. Here is what each metric means and how to interpret it.
Key Performance Metrics
| Metric | What It Measures | Good Range |
|---|---|---|
| Net Profit | Total profit minus total loss over the test period. | Positive |
| Win Rate | Percentage of trades that closed in profit. | >50% |
| Profit Factor | Gross profit divided by gross loss. A ratio of how much you win vs. lose. | >1.5 |
| Max Drawdown | Largest peak-to-trough decline in equity. Measures worst-case scenario. | <20% |
| Sharpe Ratio | Risk-adjusted return. Higher means better return per unit of risk. | >1.0 |
| Avg Trade | Average profit/loss per trade after commissions. | Positive |
| Total Trades | Number of completed round-trip trades in the test period. | >100 |
Reading the Equity Curve
The equity curve shows cumulative profit over time. A healthy equity curve trends upward with manageable pullbacks. Warning signs include:
- —Flat periods — strategy may not be active in certain market conditions
- —Sharp drops — large drawdowns that could indicate poor risk management
- —Staircase pattern — healthy, consistent growth with controlled pullbacks
Note
No single metric tells the full story. Evaluate the overall picture: a strategy with a 45% win rate can still be highly profitable if average winners are significantly larger than average losers (high profit factor).