The Sharpe Ratio: Why It Matters More Than ROI

In bull markets, everyone is a genius. If you bought a meme coin and it went up 1000%, your ROI is incredible. But is your strategy good? Probably not.

What is the Sharpe Ratio?

$$ Sharpe = \frac{R_p - R_f}{\sigma_p} $$

• Rp: Return of Portfolio
• Rf: Risk-Free Rate (e.g., Treasury Yields)
• σp: Standard Deviation (Volatility)

In plain English: "How much extra return am I getting for every unit of risk I take?"

The Gambler vs. The Pro

• Trader A: Makes 50% profit, but had a 40% drawdown along the way. (Low Sharpe)
• Trader B: Makes 20% profit, but never lost more than 2%. (High Sharpe)

Institutions will hire Trader B every single time. Trader A will eventually blow up.

Improving Your Score

To boost your Sharpe Ratio (tracked in your Analytics):

1. Reduce Volatility (use Stop Losses).
2. Increase Consistency (use Grid Bots for steady gains).

Aim for a Sharpe > 1.5. Anything above 2.0 is world-class.