Sortino Ratio
A risk-adjusted return metric similar to Sharpe but only counts downside volatility — better for asymmetric strategies.
Chris Cole's Artemis Capital, a long-volatility fund, regularly posts Sharpe ratios that look mediocre but Sortino ratios in the 3-4 range. The asymmetric upside is fairly counted only by Sortino.
Related terms
Sharpe Ratio
advancedA risk-adjusted return metric that measures how much excess return you're getting per unit of risk — higher is better.
Expectancy
advancedThe average dollar (or R) amount you can expect to make per trade over many trades — the math behind whether a strategy works.
Drawdown
intermediateThe peak-to-trough drop in your account equity — a measure of how bad your worst losing streak got.
CAGR (Compound Annual Growth Rate)
intermediateThe annualized rate of return that an investment would have earned if it grew at a steady rate every year — used to compare strategies over time.
R-Multiple
intermediateA unit that measures profit or loss in multiples of the initial risk taken on a trade — normalizes performance across different position sizes.
Breakeven
beginnerThe price at which closing your trade results in zero profit and zero loss — moving your stop here protects you from a loss.