trading strategy metrics tl; dr metrics to optimize when developing trading algorithms net profit and loss (net PnL) how much money an algorithm makes and loses over a period, minus trading free. alpha and beta alpha: how much better, in terms of profit, is the strategy compared to an alternative risk-free investment. beta: how volatile the strategy is compared to the market. sharpe ratio measure the excess return per unit of risk you are taking. it's the return on capital over the standard deviation adjusted for risk. maximum drawdown maximum difference between a local maximum and the subsequent local minimum as a measure of risk. value at risk (VaR) risk metric that qualifies how much capital is at a loss over a given time frame with some probability (assuming normal market conditions).