Equity Curve
A chart of the portfolio's total value over time. An upward slope means the strategy is making money. Dips are drawdowns. The smoother the curve, the more consistent the returns.
P&L (Profit & Loss)
The net gain or loss. Shows both dollar amount and percentage. Unrealized P&L = positions still open. Realized P&L = positions already closed.
Stop Loss (SL)
Automatic sell trigger if a position drops below a set threshold. Limits maximum loss per trade. Example: -5% SL means the position is sold if it falls 5%.
Take Profit (TP)
Automatic sell trigger when a position reaches its profit target. Locks in gains before a potential reversal. Example: +10% TP sells at 10% profit.
Max Hold Period
Maximum time a position stays open (e.g., 30 days). If TP and SL haven't triggered, the position is closed at market price. Prevents capital from being stuck indefinitely.
Win Rate
Percentage of closed trades that were profitable. 60% = 6 of 10 trades made money. Combined with average win/loss size, this determines overall profitability.
Alpha (vs SPY)
Excess return compared to the S&P 500 index. Positive alpha means the portfolio outperformed the market. Negative alpha means it underperformed. The goal is consistent positive alpha.
Backtest vs Live vs Forward
Backtest: tested on historical data (less reliable). Live: real-time paper trading with real prices. Forward: predictions being tracked going forward. Live and forward results are most trustworthy.