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Glossary / Performance metrics

Sharpe ratio

Definition

Return per unit of total volatility.

Why it matters

Useful for comparing strategies with different volatility profiles, though it penalizes upside swings as harshly as downside ones.

Formula

Sharpe = (Return - Risk free rate) / Standard deviation of returns

Example

A strategy returning 18% a year with 12% volatility and a 3% risk-free rate has a Sharpe of (18-3)/12 = 1.25.

How to track it in a journal

TradeStack calculates the core performance numbers — win rate, average win and loss, profit factor, expectancy, drawdown and consistency — automatically from imported trades, so sharpe ratio stops being something you estimate and becomes something you read.

Related terms

Expectancy
The average profit or loss you can expect from each trade over a large sample.
Profit factor
Gross profit divided by gross loss.
Win rate
The share of your trades that close in profit.
Average win
Total profit from winning trades divided by the number of winning trades.

Keep reading

Trading journal guides
Expectancy, profit factor, drawdown, backtesting and the PDT rule.
Free trading calculators
Position size, risk-reward, expectancy and options profit.
Expectancy calculator
Expected profit per trade from your own numbers.
Broker CSV export guides
Step-by-step exports for Tradovate, NinjaTrader, IBKR and more.
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