Sharpe ratio >3 ? Seriously ?
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- This topic has 8 replies, 2 voices, and was last updated 4 years ago by zilliq.
Tagged: sharpe ratio
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06/05/2020 at 9:41 AM #134659
Hi Guys,
I play with the new backtest results, but it’s strange, because on Backtest we can have Sharpe Ratio of more than 2 (Here 4.64 ! on 100 000 unit EUR/USD 1 mn, only on 40 trades and so on..)
Remember that the best trading algo have a Sharpe ratio of 3, so I think a Sharpe ratio of more than 4 is impossible (I’m not stupid and I know we haven’t fin the graal, or the @Grahal 🙂 )
What’s your Point of view ?
Cheers
06/05/2020 at 9:48 AM #13466206/05/2020 at 10:29 AM #134674Sharpe ratio is on mean gain Nicolas, not total gain
“…The Sharpe ratio reveals the average investment return, minus the risk-free rate of return, divided by the standard deviation of returns for the investment…”
But agree with you on a small trades who makes interpretation difficult (That’s why there is a correction factor on SQN/Van Tharp notably ;,-) )
Cheers
06/05/2020 at 1:53 PM #13472006/05/2020 at 4:22 PM #134742Orders are grouped as a daily return:
dailyReturn[day] = sum(perf)[day] / nb_trades[day]
Then the Sharpe ratio is calculated:
sharpe = (average(dailyReturns) – risk free interest rate between start and end of the report) / standard-deviation(dailyReturn)
The risk free interest rate is automatically calculated by the software with a geometric interpolation.
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06/05/2020 at 4:57 PM #13474706/11/2020 at 7:54 AM #13553406/11/2020 at 10:16 AM #13555506/11/2020 at 11:28 AM #135571 -
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