What Is SQN (System Quality Number)?
SQN rates the quality of a trading system by combining its average R, the consistency of its results, and how many trades you have. It rewards steady edges, not lucky streaks.
SQN, or System Quality Number, is a single score for how good a trading system is. Popularised by Van Tharp, it rewards a system that has a positive average R-multiple, consistent results, and a meaningful number of trades behind it.
SQN = (average R ÷ standard deviation of R) × √(number of trades)
What each part means
- Average R — your edge per trade. Bigger is better.
- Standard deviation of R — how spread out your results are. Lower means steadier, so it sits on the bottom and raises the score when results are consistent.
- √(number of trades) — more trades give more confidence the edge is real, so the score grows with a larger sample.
How Tracktions labels it
| SQN | Quality |
|---|---|
| 7+ | Holy Grail |
| 5 – 7 | Excellent |
| 3 – 5 | Good |
| 2 – 3 | Average |
| 1 – 2 | Below average |
| under 1 | Poor |
How to use it
- Track the trend — a rising SQN means your edge is getting stronger or more consistent. A falling one is an early warning.
- Don't trust tiny samples — because SQN scales with √trades, a big score from very few trades can be misleading. Let the sample grow.
- Improve it two ways — either lift your average R (better expectancy) or tighten consistency (smaller swings in result), often through steadier position sizing.
Educational content only. Tracktions is a trade-journaling and analytics tool, not investment advice — we are not SEBI-registered advisers and do not provide trade recommendations, tips, or assurances of returns.