> ## Documentation Index
> Fetch the complete documentation index at: https://kalpi.ai/docs/llms.txt
> Use this file to discover all available pages before exploring further.

# Net Profit

> Evaluate the absolute baseline monetary return generated by your strategy.

**Net Profit** is the simplest and most foundational metric in your performance tear sheet. It represents the absolute capital gained or lost over the entire duration of the backtest or live trading window, factoring in all winning trades, losing trades, and fundamental yields.

## The Formula

> **Net Profit** = Gross Profit - Gross Loss

## Interpreting Net Profit

While Net Profit tells you how much money the system made, it should **never** be evaluated in isolation. A high Net Profit is meaningless if it required an unacceptable amount of structural risk to achieve.

Always cross-reference your Net Profit with:

1. **Maximum Drawdown:** Did you have to suffer a 60% portfolio drop to achieve this profit?
2. **Starting Capital:** A ₹1,00,000 profit is incredible on a ₹5,00,000 account, but highly inefficient on a ₹50,00,000 account.

<Tip>
  For a more standardized way to compare profitability across different account sizes, look at the **CAGR** or **Profit Factor** metrics instead.
</Tip>