How to judge an AI trader: the five numbers that actually matter
A headline return tells you almost nothing. Learn to read the five numbers professionals use to judge a trading track record — total return, Sharpe, max drawdown, win rate, and profit factor — in plain English.
Every trading product on the internet leads with the same thing: a big green number. “Up 41% this year.” “+$18,400.” It’s designed to do one job — make you stop scrolling — and it’s almost useless on its own. A single return figure can’t tell you whether that performance came from skill or luck, from one heroic trade or a hundred steady ones, or how much white-knuckle risk you’d have had to sit through to earn it.
The good news: you don’t need to be a quant to see through it. A handful of standard numbers, read together, tell you most of what you need to know. At Magpie we put all of them on the track record page on purpose — here’s how to read each one, and what “good” actually looks like.
A return tells you what happened. The other four numbers tell you whether you’d want it to happen again.
1. Total return — the number everyone shows
Start here, but don’t stop here. Total return is simply how much the account grew over the period, as a percentage and in dollars. It’s the headline. The trap is comparing two returns without asking the obvious follow-ups: over how long? against what benchmark? and at what risk?
Always read it next to a benchmark (for U.S. stocks, the S&P 500) and a time frame. Beating the market by a little, consistently, with low risk, beats a giant number you can’t repeat.
This is why a track record should always show the benchmark line right next to the account — “up 4.8% while the S&P was up 3.1%” is a far more honest statement than “up 4.8%” floating in space.
2. Sharpe ratio — return per unit of nerve
The Sharpe ratio answers the question total return ignores: how much risk did you take to get it? It divides the return by how much the account bounced around along the way. Two accounts can post the same return; the one that got there on a smoother ride has the higher Sharpe — and is the one you’d actually want to own.
Below 1 is unremarkable. Around 1–2 is solid. Sustained above 2 is excellent and rare. A high Sharpe is the difference between a strategy you can hold and one that shakes you out at the worst moment.
3. Maximum drawdown — the one that tells the truth
If you only learn to read one risk number, make it this one. Maximum drawdown is the deepest peak-to-trough fall the account suffered — the worst it ever felt to hold. Returns flatter; drawdown doesn’t. It’s the number that tells you whether you’d have actually stuck with the strategy or panic-sold at the bottom.
Ask yourself: could I have watched the account fall this far, and not touched it? If the max drawdown is a number you couldn’t stomach in real time, the returns above it aren’t really available to you — you’d have bailed before earning them.
There’s no universal “good” — it depends on your stomach — but a disciplined strategy keeps it modest relative to its returns. A small drawdown paired with a healthy return is the signature of real risk control, not luck.
4. Win rate — necessary, but not sufficient
Win rate is the share of trades that made money. It’s the most intuitive number and the most over-weighted. A 90% win rate sounds elite — until you learn the 10% of losers were enormous. Plenty of excellent strategies win barely half the time and make all their money because the winners dwarf the losers.
Useful, but never alone. A 55% win rate with disciplined losses can be far better than an 80% win rate that occasionally blows up. Always pair it with the next number.
5. Profit factor — does the math actually work?
This is the one that ties it together. Profit factor is gross profit divided by gross loss — every dollar the strategy made, over every dollar it lost. Above 1, the strategy makes money; the higher it goes, the more the wins outweigh the losses. It quietly accounts for both how often you win and how big those wins and losses are.
Under 1 loses money. 1.5 is a real, workable edge. Above 2 means the strategy makes two dollars for every one it gives back — a durable, repeatable advantage rather than a hot streak.
Read them together, not one at a time
No single number is the answer — that’s the whole point. A great return with a terrible drawdown is a warning. A high win rate with a profit factor under 1 is a strategy quietly bleeding out. What you’re looking for is the combination: a solid return, a Sharpe above 1, a drawdown you could live with, and a profit factor comfortably over 1.5. Here’s a snapshot of what that balance can look like on a real, live account:
- Sharpe: 1.99 — risk-adjusted return
- Max drawdown: −2.52% — peak to trough
- Profit factor: 2.09× — over 148 trades
None of those numbers is a flashy headline. Together they describe something far more valuable: a strategy that makes steady money, controls its risk, and could plausibly keep doing both.
Why we show all of them — including the ugly ones
It’s trivial to design a chart that makes any strategy look brilliant: pick the right start date, hide the losers, lead with the win rate. We think that’s exactly backwards. Magpie publishes every one of these numbers, every losing trade, and the reasoning behind each decision — so you can do this analysis yourself instead of trusting ours. Every jargon term in the app even carries a built-in explainer that tells you whether the number is good, so you can learn to read it as you watch.
That’s the whole bet: a track record you can actually interrogate is worth more than one you’re asked to admire. Now you know which numbers to interrogate it with.