Sharpe Ratio
Formula
Sharpe ≈ mean(daily return) / std(daily return) × √252 (approximate)
Worked example
Average daily return 0.20% with a daily standard deviation of 1.00%.
| Daily mean ÷ daily std | 0.20% / 1.00% = 0.20 |
| Annualise | × √252 ≈ × 15.87 |
| Sharpe (approx.) | 0.20 × 15.87 |
| Result | ≈ 3.17 (illustrative) |
It rewards smooth equity curves and penalises volatile ones, which is useful for comparing systems of similar return. As an annualised statistic it needs a reasonable sample of trading days to mean much.
It assumes roughly normal returns and treats upside volatility as “risk”, so it can understate positively skewed systems. We label it approximate; it is optional in v1 and needs enough daily data.
How TradeJournalOS shows it
Presented as an approximate, annualised figure from your daily return series when there are enough trading days to compute it.
Create a free account to see sharpe ratio on your own trades.
Frequently asked questions
Why is the Sharpe ratio labelled approximate? +
It is built from daily-aggregated returns and the usual normality assumptions, and it needs a sufficient sample of trading days. We label it approximate to avoid over-precision.
What annualisation factor is used? +
The standard √252, reflecting roughly 252 trading days per year.