The Sharpe ratio is the average return divided by the standard deviation of returns, usually after subtracting a risk-free rate. It answers how much result you got for each unit of variability: a higher Sharpe means smoother, more consistent results, a negative one means losing on average. Fund managers quote it per year; for a trading journal it is often worked out per trade instead, which gives smaller numbers that are not comparable with fund figures.
What is the Sharpe ratio formula?
Sharpe ratio = (average return − risk-free rate) ÷ standard deviation of returns
In the standard version the returns are periodic, such as daily or monthly percentages, and the result is scaled to a year by multiplying by the square root of the number of periods — about 15.9 for 252 trading days. Two people quoting a "Sharpe ratio" may therefore mean quite different calculations.
What is a per-trade Sharpe ratio?
It uses each closed trade's result as one return: the average result per trade divided by the standard deviation of those results, with no risk-free rate and no scaling to a year. It suits a trader whose trades come at irregular times, and it is most useful for comparing your own periods, setups or strategies with each other.
Worked example
Five trades close at +$200, −$100, +$150, −$100 and +$50. The average is $200 ÷ 5 = $40. The squared distances from that average are 25,600, 19,600, 12,100, 19,600 and 100, which average 15,400, so the standard deviation is about $124. The per-trade Sharpe ratio is 40 ÷ 124 = 0.32.
How is the Sortino ratio different?
The Sharpe ratio treats a big win as just as "volatile" as a big loss. The Sortino ratio only counts the downside: it divides the same average by a deviation built from the losing results alone. In the example the two −$100 trades give a downside deviation of about $63, so the Sortino ratio is 40 ÷ 63 = 0.63. When Sortino is well above Sharpe, most of your variability comes from wins rather than losses.
Sharpe ratio in ApeX Journal
ApeX Journal uses the per-trade version, from each closed trade's net result after swap and commission, with no risk-free rate and no annual scaling — the Reports label it Sharpe (per trade) to make that clear. The Sortino ratio sits beside it, built from the losing trades. Both appear in the Dashboard summary, in Reports and in the HTML and CSV files it exports. On screen they turn red when negative, and they stay blank when there are fewer than two trades or every result is identical, since there is no variability to divide by.
Questions
What is a good Sharpe ratio for a trader?
It depends on which version you are reading. For an annual Sharpe, above 1 is generally considered good and above 2 very good. A per-trade Sharpe is much smaller by nature, so judge it against your own history: a rising figure over comparable periods means results are getting steadier relative to their size.
Why is my Sharpe ratio negative?
Because the average trade in that range lost money. The standard deviation is always positive, so the sign of the Sharpe ratio is simply the sign of the average result.
Should I look at Sharpe or Sortino?
Both, side by side. Sharpe penalises every swing, Sortino only the losing ones. A strategy with occasional large wins will look better on Sortino; one with frequent large losses will look poor on both. Read them alongside max drawdown, which shows the worst stretch in money terms.