How to calculate actual sharpe ratio

[CaptainFill]

Hello,

I'm having trouble calculating my true sharpe ratio. With my ATS, the BT shows a .3 sharpe ratio over an 8 year test however judging by the performance, it is not accurate (It's too low, of course ).

So my question is, how can I calculate my sharpe ratio using the trade log or otherwise?

Also, what would be the most accurate risk free rate? I know that at this day and age the risk free rate is extremely low, which if used, could show a higher SR than an average of say 10 years.

Thanks!

[NinjaTrader_Matthew]

Hi there,

Here is the formula we use to calculate sharpe ratio

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

Where profit per month is:

Currency
cumulative profit / # of months
Percent
(1 + cumulative profit)(1 / # of months) - 1
Points
cumulative profit / # of months

And cumulative profit is

Currency
SUM(profit * quantity * point value) of all trades
Percent
PRODUCT(1 + profit / entry price) of all trades - 1
Points
SUM(profit * quantity) of all trades

profit is defined as (exit price – entry price) for long trades and as (entry price – exit price) for short trades, quantity is defined as the number of contracts traded, and point value is defined as the monetary conversion of each point (e.g. 100 for currency pairs).

I believe this informations should help you determine how we arrived at the values you are seeing for your strategy. If you see any issues with these methods, or does not align with what you see, please let us know and we can debug that if needed.

In terms of alternative methods or accuracy of methods, we will leave this thread open for the community to discuss and add their $0.02

Do not hesitate to contact us if there is anything else I can do for you.