Algorithm tradingPerformance Measurement in Algorithmic TradingBy Mehrzad Abdi | 25 March 2025Abstract
Algorithmic trading has revolutionized the financial markets by enabling traders to execute orders at speeds and frequencies impossible for human traders. As the complexity and volume of algorithmic trading strategies increase, so does the need for robust performance measurement tools. This article delves into the top 10 most renowned performance metrics used in evaluating algorithmic trading strategies. By understanding these key indicators, traders and analysts can better assess the efficacy of their algorithms, optimize strategies, and manage risks effectively.
Keywords: Algorithmic Trading, Performance Measurement, Net Profit, Sharpe Ratio, Max Drawdown, Sortino Ratio, Profit Factor, Annualized Return, Information Ratio, Beta, Alpha, Calmar Ratio