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Backtesting
Four ways to score a strategy's results against its losses or its volatility.
Profit factor is gross profit ÷ gross loss: 1.0 is break-even, and above about 1.5 is generally considered solid for a trading strategy after costs. The Sharpe ratio (William Sharpe, 1966) is average return above the risk-free rate ÷ the standard deviation of returns: return per unit of volatility. The Sortino ratio is the same but only counts downside volatility, so big winning days don't count against you. The Calmar ratio is annual return ÷ maximum drawdown.
For a prop trader, drawdown-based measures such as Calmar often matter most, because the account is lost at a fixed drawdown, not at a fixed volatility.
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For education only, not financial advice.