System Quality Number (SQN)

A Van Tharp measure of the quality of a trading system.  SQN measures the relationship between the mean (expectancy) and the standard deviation of the R-multiple distribution generated by a trading system. It also makes an adjustment for the number of trades involved. Dr. Tharp has determined that the better the SQN, the easier it is to use various position sizing strategies to meet one’s objectives. SQN = SQRT(100) * (Avg Wins/Std Dev Wins) used to compare systems. In addition to SQN, look at the R distribution histogram from -1R to +2R and beyond to compare systems.