Sharpe Ratio - What you need to know | #tradingstrategy #tradingstrategies #trading

#sharperatio #tradingstrategy #tradingstrategies #trading

The Sharpe Ratio is a tool that tells us the quality of a trading strategy or the performance of an investment fund.
It’s a widely used indicator for comparing the return and its risk. The name is given by its inventor, William Sharpe, who developed the ratio during the 1960s. Sharpe later won the Nobel Prize in economics in 1990 for his contributions to the financial industry.

The Sharpe Ratio measures the excess return compared to the risk-free rate per unit of risk. The less swings in the returns, the better (higher) the Sharpe Ratio. All things equal, investors prefer the smoothest returns. If your strategy is volatile, you need to be compensated in the form of higher returns.

This video explains what the Sharpe Ratio is and clarifies what a good Sharpe Ratio is: a good Sharpe Ratio is preferably above 0.75, but be careful if it's above 1.5 (could be curve fitted).

If you want to go into more detail about the Sharpe Ratio, please have a look at our article on our webpage.

More about the Sharpe Ratio:
https://www.quantifiedstrategies.com/sharpe-ratio

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