Measure your trading edge

A trading edge is the advantage your trading hypothesis creates over randomly selected trades. This section contains steps traders can take to identify and measure a trading edge, as well as an overview of the edge measurement capabilities featured on Tradewell.

Measure your edge — it's free

Evaluate
Clearly see edge — then measure its magnitude

Strategy Chart

Build your strategy

Backtest your chosen security with a diverse set of independent variables

Run a backtest to reveal the historical tendencies of securities under specific market conditions
Backtest results are displayed through a variety of data visualizations, including a scatter plot, probability distributions, historical simulations and summary tables.

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Visualize
Plot relationships between metric and price

Metric-Price Chart

Spot the pattern

Identify the relationship between the two variables

The signal data from your backtest appear on the scatter plot in the form of black dots
Normal return data are highlighted in the form of green dots
The horizontal lines display the mean values of the two data sets.

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Isolate
Identify biases and anomalies

Tradewell isolated reisk-reward scatterplot

Strategy Returns

Validate your edge

Compare the average return of your trading hypothesis signals with the average return of all data

The black horizontal line represents the mean forward return of the trading signals generated by your backtest
The green horizontal line represents the average forward return of all the data points in the lookback period
The separation between the two lines helps to identify whether the means of the two data sets are different.

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