Calculating real-time key performance and risk indicators

Real-time performance and risk metrics are important for maintaining robust trading strategies. They allow us to compare real-life performance to the performance of our backtests. They provide immediate feedback on the effectiveness of our trading algorithms and let us make adjustments in response to market volatility or unexpected events. By continuously monitoring risk metrics such as drawdowns, volatility, and value at risk, we can effectively manage exposure and mitigate potential losses. Most professional algorithmic traders spend their time analyzing and explaining deviations from the performance that they expect in their backtests to the performance that they observe during live trading. This recipe will introduce the tools we need to do the same.

Getting ready

We’ll use empyrical-reloaded to compute performance and risk statistics. To install it, use pip:

pip install empyrical-reloaded

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