The Sharpe Ratio is a metric used to evaluate the quality of your trading strategy — not just how much you earn, but how much risk you take to earn it.
📊 Formula:
Sharpe Ratio = (Average Return − Risk-Free Rate) / Standard Deviation of Return
🧠 Why It Matters:
• Higher Sharpe = smoother, more stable returns
• Lower Sharpe = big swings, high volatility
🔼 How to Improve Sharpe Ratio:
• Focus on setups with high risk-to-reward (R:R)
• Cut losing trades quickly
• Reduce trade frequency and avoid noise
• Keep a trade journal to iterate and improve
Last updated 10 months ago