The Van Tharp SQN, explained.

One number that answers: how strong is this trend, and how tradeable is it? The System Quality Number (SQN) is the core of the NextOrderAlpha market classification.

The formula

Van Tharp designed the SQN to grade trading systems: SQN = √N × mean(R) / stdev(R), where R is a series of results. Applied to a marketinstead of a system, R becomes the market's daily percent returns and N the lookback — for the dashboard, the last 100 sessions. A high positive SQN means returns have been both positive and consistent; a market grinding up steadily scores higher than one whipsawing to the same destination.

From number to market type

The 100-day SQN is bucketed into a direction label. For equities/ETFs we use the newsletter bands: ≥ 1.47 Superbullish · 0.70 Bullish · 0 Neutral · −0.70 Bearish · below that Superbearish. Crypto trades a different distribution, so the crypto universe uses calibrated bands (≥ 1.75 Strong Bull / ≥ 0.70 Bull / ≥ 0 Neutral / ≥ −1.00 Bear / Strong Bear). Direction is then crossed with a volatility state (from the Wilder ATR(20)) to form the market type — e.g. Bullish / Quiet — the single read the whole platform is built around.

Why it beats eyeballing a chart

• It is reproducible — the same data always yields the same label, through every regime since 1993.
• It separates strength from noise — the standard deviation in the denominator punishes choppy markets that look trendy.
• It scales across markets — the same formula ranks 160 instruments and 115 crypto assets on one scale, which is exactly how the leadership board is built.

See it live

Today's 100-day SQN, the volatility state, and the resulting market type are public (one session delayed) on the Market Regime page — and the share of markets above the bullish threshold is the spine of Market Breadth.