Scoring equity path consistency with a k-ratio overlay

A diagnostic-overlay beside the trade engine

The archive describes a diagnostic-overlay: a companion procedure that records another system’s equity path and reports a score without emitting trade instructions.

It is meant to run at the same time as a separate trade-generating system and write that system’s k-ratio to a log. The evaluation procedure issues no buy or sell signals.

What each equity-observation stores

Each observation stores equity as closed net profit plus open-position profit. In the fixed wording used here, an equity-observation is a dated wealth reading defined that way.

The full ratio is computed only on the last calculation date of the sample.

How the k-ratio is obtained

Equity is regressed on observation index with ordinary least squares to obtain an intercept and a slope.

Residual scatter around the fitted line is converted into a slope-standard-error, using two fewer degrees of freedom than the observation count. That slope-standard-error is the residual scale of the equity-versus-index regression divided by the root of the centered sum of squares of the observation index.

The reported k-ratio is the regression slope divided by the product of the slope-standard-error and the square root of the observation count. A k-ratio is a unitless evaluation score equal to the linear-regression slope of sequential equity divided by that slope’s standard error scaled by the square root of the observation count.