What is a good System Quality Number (SQN)?
A good System Quality Number (SQN) is 2.5 or higher, measured over at least 100 trades. Below about 1.6 the edge is weak or hard to tell apart from random; 2.5–2.9 is good, 3.0–5.0 is excellent, and a genuine reading above 7 is rare enough that you should double-check for overfitting.
| SQN | Van Tharp rating | What it means |
|---|---|---|
| Below 1.6 | Poor | Weak edge, or hard to distinguish from random |
| 1.6 – 1.9 | Below average | Tradeable but shaky |
| 2.0 – 2.4 | Average | A workable system |
| 2.5 – 2.9 | Good | A solid, reliable system |
| 3.0 – 5.0 | Excellent | Strong, consistent edge |
| 5.0 – 6.9 | Superb | Rare |
| 7.0 and above | “Holy grail” | Verify carefully for overfitting |
The SQN formula
SQN = (Expectancy in R / Standard deviation of R) × √N, where N = min(number of trades, 100).
In words, the System Quality Number takes your R-expectancy (the average result per trade in units of risk), divides it by how much those per-trade results vary, and scales it by the square root of the number of trades. Van Tharp caps N at 100 so a system cannot inflate its score simply by taking more trades — this cap is what makes the rating table meaningful, and most glossary pages leave it out.
SQN in StrategyQuant
StrategyQuant reports SQN in its databank and ranking, and it is one of the metrics we optimise toward when building robust strategies, because it rewards consistency rather than a few lucky trades. New to the software? See our guide to trialling StrategyQuant for free.
Frequently asked questions
What is a good SQN value?
An SQN of 2.5 or higher over at least 100 trades is good, and 3.0 or more is excellent. Below roughly 1.6 the system’s edge is weak or statistically hard to separate from random.
What is the SQN formula?
SQN = (expectancy in R ÷ standard deviation of the R-multiples) × √N, where N is the number of trades capped at 100.
Why does SQN cap the trade count at 100?
Because √N keeps growing with more trades, an uncapped SQN would reward a system just for trading more often. Van Tharp caps N at 100 so scores stay comparable between systems with different numbers of trades.
How is SQN different from R-expectancy?
R-expectancy is the average result per trade in units of risk. SQN builds on it by also factoring in the consistency of those results (their standard deviation) and the sample size, so it rewards steady edges over lucky ones.
How is SQN different from the Sharpe ratio?
Both are risk-adjusted quality measures, but SQN is calculated from per-trade R-multiples while the Sharpe ratio is calculated from periodic (e.g. daily or monthly) returns.
Can SQN be negative?
Yes. When a system’s expectancy is negative — it loses money on average — its SQN is negative too.
Read SQN alongside R-expectancy, profit factor, the Sharpe ratio and Z-score, and see how our strategies perform on real money in the live trading portfolio.
Your move: hold your systems to a number
Here's the challenge: stop judging a strategy by its equity curve and start judging it by its SQN, measured over at least 100 trades. Anything under about 1.6 is barely distinguishable from random; a solid, tradeable edge starts around 2.5. Run the number on your own systems — and only trade the ones that clear the bar.
The systems worth trading are the ones that survive the number. Go measure yours.
