What Metrics Matter When Evaluating a Quant Trader's Performance?

Performance Reporting Standards

A credible report should include:

• ✦ Time period analyzed
• ✦ Benchmark used
• ✦ Transaction costs
• ✦ Maximum drawdown
• ✦ Monthly return distribution
• ✦ Out-of-sample results

Drawdown Metrics

Ask for:

• ✦ Maximum drawdown (peak-to-trough decline) - absolute and percentage
• ✦ Average drawdown depth and recovery time
• ✦ Drawdown duration - how long to get back to previous high
• ✦ Number of drawdowns exceeding 10%, 20%, 30%

Trade-Level Metrics

Critical questions:

• ✦ Win rate (percentage of profitable trades)
• ✦ Average win vs average loss ratio
• ✦ Profit factor (gross profit / gross loss) - should be >1.5
• ✦ Maximum consecutive losses
• ✦ Trade frequency (daily, hourly, per minute)

Execution Quality Metrics

For strategies that actually trade:

• ✦ Slippage (difference between theoretical and actual fill price)
• ✦ Market impact (how price moves against you as you trade)
• ✦ Fill rate (percentage of orders that execute)
• ✦ Latency (order to fill time)

Red Flags in Performance Reports

Be skeptical if:

• ✦ Sharpe > 3 with no explanation (likely overfit or survivorship bias)
• ✦ No drawdown data provided (hiding the bad periods)
• ✦ Performance shown only on specific assets or time periods
• ✦ No out-of-sample validation
• ✦ Performance looks too perfect (low volatility, no losing months)

Performance Evaluation Checklist

Review before making decisions:

• ✦ Returns verified
• ✦ Risk metrics reviewed
• ✦ Drawdowns understood
• ✦ Execution costs included
• ✦ Capacity constraints evaluated
• ✦ Live performance compared with backtests

Evaluate Holistically