Reading Risk Metrics

High returns mean nothing without understanding risk. Arena provides several risk metrics to help you evaluate traders beyond just ROI.

Max Drawdown

The largest peak-to-trough decline in a trader's equity. A 30% max drawdown means the trader's account dropped 30% from its highest point before recovering.

• < 10%: Very conservative
• 10-25%: Moderate risk
• 25-50%: Aggressive
• > 50%: Very high risk

Sharpe Ratio

Measures risk-adjusted return — how much return per unit of volatility.

Sharpe = (Average Return - Risk-Free Rate) / Standard Deviation of Returns

• < 0.5: Poor risk-adjusted returns
• 0.5-1.0: Acceptable
• 1.0-2.0: Good
• > 2.0: Excellent

Arena computes Sharpe from daily returns over the relevant period.

Win Rate

The percentage of profitable trading days. A 60% win rate means the trader was profitable on 6 out of 10 days.

• > 65%: Consistently profitable
• 50-65%: Average (can still be very profitable with good risk/reward)
• < 50%: Loses more often than wins (may still profit if winners are larger)

Using Metrics Together

A trader with 200% ROI but 80% max drawdown is far riskier than one with 50% ROI and 15% drawdown. Always look at the full picture: ROI, drawdown, Sharpe, and win rate together tell the real story.