How to read a trading strategy fact sheet without being fooled
Read any trading strategy fact sheet in five minutes with five questions: live or backtest, sample size, gross or net, account and contracts, worst drawdown.
A strategy fact sheet is one page with a large number at the top and a rising curve underneath it. It looks like a report. Very often it is a sales asset wearing a report's clothes, and what separates the two is not the layout. It is which lines are on the page, and which ones are quietly absent.
The five questions, in order
- Is this live or a backtest?
- How many trades is it built on?
- Is the profit gross or net?
- What account size, and how many contracts?
- What was the worst drawdown?
Everything else is commentary: the Sharpe ratio, the monthly heat map, the smooth curve, the badge that says "verified". Commentary is fine. But if those five answers are missing, the commentary is describing nothing.
A fact sheet is only as trustworthy as its worst-looking line. Drawdown is the one number that never flatters anybody, so if a sheet does not show one, that is not an oversight. It tells you what kind of document you are holding.
Question 1: live or backtest?
This changes the meaning of every other number on the page, and it is the answer most often blurred. A backtest is a simulation over historical data, built with full knowledge of what happened next. A live record is money that actually moved. Both are useful. Only one faced real fills.
Question 2: how many trades?
A result built on 40 trades is a story. A result built on several thousand is closer to evidence. In a small sample, luck and edge look identical, and no statistical vocabulary on the page fixes that.
Question 3: gross or net?
Gross is the number the platform prints. Net is what survives commissions, exchange fees and slippage, and on a strategy that trades daily the gap is not a rounding error. Most sheets show gross without using the word. One profit figure and no cost assumption means gross.
| Line | How it is derived | Figure |
|---|---|---|
| Reward to risk | Target ÷ stop, both placed at entry | 3:1 |
| Break-even win rate | 1 ÷ (1 + 3) | 25% |
| Costs | $1.90 a round turn plus one tick | ≈ $2.40 per trade |
Question 5: what is the worst drawdown?
Maximum drawdown is the deepest fall from an equity high to the low that follows. It is the closest a fact sheet comes to describing what holding the system would have felt like, which is exactly why it is the line most often left off.
The profit line tells you what the system did. The drawdown line tells you what you would have had to sit through to collect it.
The lines that are missing on purpose
Then check for absences. These are the ones that matter.
The last one is the real dividing line. A fact sheet you can reproduce is a claim. A fact sheet you can only look at is an advertisement. The checklist to hand any seller, us included, is in how to choose a trading bot, and the faster version for sheets that fail in thirty seconds is in the red flags that give away a scam.
Frequently asked questions
Why does drawdown matter more than the average monthly profit?
Because the average is only collected by someone who stays in the seat, and the drawdown decides whether you do. An average of a few thousand dollars a month is a total divided by the number of months, not a paycheck. The drawdown describes the worst stretch you would have had to hold through to reach it, so size your account and your expectations around that figure instead.
How do I check that a fact sheet is not cherry-picked?
Check that the start date is not suspiciously convenient and that the sheet covers the hard periods for its market rather than skipping them. Then compare the headline window with the full history: a sheet showing its best seven months in large type and the whole period in small type is telling you which number it prefers. Length and continuity are what protect you, because any short window can be chosen to look good.
Should I trust a third-party verified badge?
Only once you know what was verified. Some services confirm that trades really occurred in a connected account, which is meaningful. Others simply host a chart the seller uploaded, which is not. Read what the badge certifies, check whether the underlying account is live or simulated, and keep asking the same five questions, because a verified sheet with no drawdown line is still a sheet with no drawdown line.
- CFTC, "Customer Advisory: Be Cautious of Trading Systems and Robots."
- Commodity Futures Trading Commission, Regulation 4.41(b), required disclosure for hypothetical performance results.
- National Futures Association, Compliance Rule 2-29, communications with the public and promotional material.
- NinjaTrader, "Strategy Analyzer" documentation, performance report metrics.
Educational content, not investment advice. Trading futures involves substantial risk of loss and is not suitable for every investor. Any reference to Algomyth results is hypothetical, simulated over historical data, and shown in full on the performance page; past performance does not guarantee future results.
Twenty years, drawdowns included
Every engine publishes its full history repriced at today's values, with the losing years and the deepest drawdowns printed as plainly as the profits. Verify first, decide later.
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