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  #1  
Old 06-14-2017,
AiraiseExoro AiraiseExoro is offline
 
Join Date: Apr 2017
Posts: 0
Default Sharpe Ratio

I'm having trouble with this Sharpe Ratio thing.

In NinjaTrader, it spits out the Sharpe Ratio for every backtest or optimization run, and so far the value for my strategy are always about 0.10 or below.

Yet NinjaTrader Help says this:

Quote:
Sharpe Ratio
This statistic returns a ratio that measures the risk premium per unit of risk of your strategy. It can help you make decisions based on the excess risk of your strategies. You may have a high-return strategy, but the high returns may come at a cost of excess risk. The Sharpe ratio will help you determine if it is an appropriate increase in risk for the higher return or not. Generally, a ratio of 1 or greater is good, 2 or greater is very good, and 3 and up is great.

(Profit per Month – risk free Rate of Return) / standard deviation of monthly profits


So by their scale all my backtests so far are absolute rubbish!

Admittedly the best backtest I've got so far has $30K profits and $20K drawdown, so I was expecting poor stats, but this is pretty sad.

Or do I understand it wrong ?
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  #2  
Old 06-15-2017,
aisupibxw aisupibxw is offline
 
Join Date: Mar 2017
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Default

Have you considered your drawdown in relation to account size?
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  #3  
Old 06-16-2017,
理漯郷Estic 理漯郷Estic is offline
 
Join Date: Feb 2017
Posts: 0
Default

Account size should be irrelevant to the Sharpe Ratio, surely?
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  #4  
Old 06-18-2017,
AjaTopp124 AjaTopp124 is offline
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Join Date: Jun 2017
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Default

What's your question?
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  #5  
Old 06-19-2017,
akehuhar akehuhar is offline
 
Join Date: Jun 2014
Location: Algeria
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Default

The low values that you get mean that your system does not profit from clever timing of the market but by assuming excess risk. This further means that it may at some point in the future generate even greater drawdown.
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