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Performance metrics

Sortino ratio

Sortino ratio is the Sharpe ratio's honest sibling — same shape, but only downside volatility counts, because big winners aren't a bug, they're the point.

Sortino = (mean return − target return) / downside deviation. Same shape as Sharpe but it doesn't count upside volatility as risk.

Why this matters: trading P&L isn't symmetric. Big winners are a feature, not a bug. Sharpe treats a great month and a terrible month as equally 'volatile;' Sortino only cares about the terrible ones.

Sortino is usually higher than Sharpe for the same strategy by a factor of 1.3–1.6. Comparing your Sortino to other traders' Sharpe is apples to oranges — pick one metric and stay consistent.

Like Sharpe, Sortino needs sample-size discipline: <30 trades and the number is mostly noise.

Not financial advice. This page describes a commonly-used trading concept for educational purposes. It is not a recommendation, does not predict performance, and is not personalized advice. Past performance does not guarantee future results.