How to look at strategy statistics without self-deception

When a person chooses a trading strategy, he really wants to see confirmation that it is “good”. And it is at this moment that self-deception kicks in.

The eye almost automatically catches on to the beautiful profitability figure. If the strategy has grown significantly, the brain begins to fill in the rest on its own: that means the system is reliable, that means everything works, that means you can connect.

But a competent analysis of statistics does not start with profit.

Where to start

Don't just look at the final percentage. The same result can be achieved in very different ways: calmly and evenly, or at the expense of huge risks.

Therefore, the correct question is not “how much did the strategy earn”, but “at what cost did this result come about?”

Why is drawdown more important than a beautiful percentage?

Drawdown is one of the most honest indicators. If a person psychologically cannot withstand a drawdown of 20-30%, it is useless for him to look at the beautiful profitability: at the very first serious decline, he will most likely switch off at the worst moment.

Therefore, statistics need to be applied not only to money, but also to one’s own psychology.

Signs to check for

Look at the length of the story. A strategy with a good result in three weeks and a strategy with a history of many months are not the same thing.

Check the shape of the curve: there are no strange dips, sharp jumps, long hangs with a sharp jerk.

Look at the behavior of transactions: frequency, average profit and loss, whether there is a negative overhang and a dangerous increase in volume.

If the picture looks too ideal (high profitability, minimal drawdown, almost straight growth line), this is not a reason to relax - this is a reason to check even deeper.

Bottom line

Looking at statistics without self-deception means not falling in love with beautiful returns and not wishful thinking.

You need to look at the drawdown, the length of the history, the shape of the curve, the structure of transactions and the overall level of risk. Then the likelihood of an error is lower, and the decision to connect is calmer and more mature.