SPEC-EAV-001 v0.2 · Layer L2 Risk management
K-07 Concentration of profit and loss
K-07 tests how far the reported result depends on a small number of trades. The share of total loss held by the five largest losing trades, and the share of total profit held by the five largest winning trades, are computed.
What it examines
The contribution of the largest individual trades to the aggregate result.
How it is computed
Share of total loss taken by the five largest losses. Share of total profit taken by the five largest gains.
What a defect means
If profit or loss concentrates in a handful of trades, the entire performance statistic rests on chance. A small change in the sample reverses the conclusion.
Judgment states
| Pass | The structure is observed and meets the threshold. |
|---|---|
| Caution | The structure is observed but sits at the boundary of the threshold. Evidence figures are presented alongside. |
| Defect | The structure is not observed, or clearly falls outside the threshold. |
| Not judgeable | The required input data is absent. Marked distinctly from a pass. |
Threshold
Not fixed. Determined from calibration data. See SPEC-EAV-001 §11.
Basis
Jung Chunghwa, FX Market Structure and Systematic Trading (2026), ISBN 979-11-220192-1-6. Research note R-001, Structural problems of EA-based systematic trading (2026-08-20).
Questions this item answers
- How much of my EA's profit comes from a few trades?
- Why do a handful of trades invalidate a backtest?
Related items
Related terminology
Revision · SPEC-EAV-001 v0.2 · 2026-08-21