Glossary
Plain-language explanations of the metrics used on Quant Arena, with the exact formulas we use and live examples from the leaderboard.
Sharpe Ratio
Return per unit of total volatility. The most common way to compare risk-adjusted performance between strategies.
Sortino Ratio
Like the Sharpe ratio, but only downside volatility counts as risk.
Calmar Ratio
Annual growth rate divided by the worst peak-to-trough loss. Answers: how much return per unit of pain?
Maximum Drawdown
The largest fall from a previous peak in the equity curve. The single best measure of how painful a strategy was to hold.
CAGR (Compound Annual Growth Rate)
The constant yearly growth rate that would turn the starting equity into the ending equity over the same period.
Annualized Volatility
How much daily returns swing around their average, scaled to a yearly figure.
Win Rate
In Quant Arena: the share of trading days with a positive strategy return. Not the share of winning trades.
Profit Factor
Total gains divided by total losses. Above 1 means the strategy made more than it lost.
Turnover
How much the position changes on an average day. Higher turnover means higher trading costs in real life.
Arena Score
Quant Arena's composite rating: a weighted average of five percentile ranks against every strategy on the same market and window.
Walk-Forward Optimization
Choosing parameters on past data only, then testing them on the following unseen period, over and over.
Martingale Strategy
Doubling the position after each loss so that one win recovers everything. High win rate, rare but catastrophic losses.
Ulcer Index
The root-mean-square of drawdowns: it grows with both how deep and how long the equity stays below its peak.
Time in Market (Exposure)
The share of days a strategy actually held a position. Low exposure explains low win rates and low volatility.
Alpha and Beta
Beta measures how much a strategy moves with its market; alpha is the return left over after accounting for that.
Probabilistic and Deflated Sharpe Ratio (PSR, DSR)
The probability that a strategy's true Sharpe ratio is above zero, given how long and how lumpy its track record is.
Value at Risk (VaR) and CVaR
VaR is the daily loss exceeded on only 5% of days; CVaR is the average loss on those worst days.
Bootstrap Confidence Interval
A range for CAGR or maximum drawdown that shows how much the result depends on the particular order of good and bad days in the backtest.
Recovery Factor
Net return divided by the maximum drawdown: how many times a strategy earned back its worst fall.
Blow-up Risk and Stop-out
The risk that an account loses so much that the broker closes every position. In our backtests on hourly data from May 2025 to May 2026, 61 of 307 gold runs with default lot sizes ended this way; on three currency pairs, none did.