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Performance & capacity

∞structural

Measuring an edge honestly: returns, risk, the ratios that summarise them, and why every strategy has a capital ceiling beyond which alpha decays.

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What's in this topic

4 pages, each linking down to the ideas inside it.

Return & risk metrics01
Returns, volatility, drawdown, hit rate, P&L per trade. The basic vocabulary, and why high-frequency returns need event-aware, fat-tail-aware versions of all of them.
∞structural
Risk-adjusted ratios02
Sharpe, Sortino, Calmar: return per unit of risk. Powerful and routinely abused: a high Sharpe on fat-tailed, autocorrelated, overfit returns is a number, not an edge.
∞structural IX-SHARPE
Performance attribution03
Where did the P&L actually come from: spread, signal, rebate, or luck? Attribution splits a market maker’s return into its sources so you fix the right thing.
∞structural
Capacity & alpha decay04
Every edge has a capital ceiling: trade more and impact eats the alpha; stay public and crowding erodes it. Capacity is why a small book can hold an edge a large one cannot.
∞structural IX-CAPACITY

Where this fits

↔ Across · composes with Trading costs ↔ Across · composes with The business of HFT ↔ Across · composes with Risk management → Apply · makes money in Is HFT still profitable in 2026? → Apply · makes money in Markets ⤓ Build / Buy · tool needed Datasets & tools