Win rate, drawdown and the buy-and-hold gap

Total return compounds. Each trade multiplies what came before it, the way a real balance does. Average trade return is the plain mean across trades.

A +10% trade followed by a −10% trade averages exactly 0%. The balance finishes at 99. Averages hide that and compounding does not, so when the two numbers diverge sharply you are looking at a volatile strategy, whatever the average says.

Win rate is the share of closed trades that finished positive after costs. A position still open at the end is left out of it entirely, since it has no result yet. A high win rate is not a good rule on its own: many small wins and one enormous loss score beautifully here.

Max drawdown is the deepest peak-to-trough fall across the whole equity curve, including the unrealised swings inside an open position. It is not the worst single trade. It is the worst stretch, and the question it answers is whether you could have sat through it.

Next to your result sits what the asset alone did over the same window: bought at the start, still held at the end. It belongs to the window and the pair, not to your rules, so two strategies on the same pair and window see the same figure.

It is there because it is the comparison most likely to change your mind. A strategy that finished below it, while taking sixty trades and asking for your attention all year, did all that work for less than doing nothing.