Sharpe takes your average return and divides it by how wildly that return swings around. Two strategies can both make 20% a year — one straight line up, one a roller-coaster. Sharpe rewards the straight line and punishes the roller-coaster. A higher Sharpe means smoother gains for the same total profit; a lower Sharpe means you bled equity on the way to the same destination.
A strategy earns 12% on average per year, with a 10% standard deviation of returns. The risk-free rate is 2%.
Rough bands traders use: - Below 0.5 — barely paying you for the pain. Often worse than just holding the index. - 0.5 to 1.0 — workable, but most discretionary edges live here. - 1.0 to 1.5 — solid. The strategy earns more than it shakes you. - 1.5 to 2.0 — strong. Most retail traders never sustain this for long. - Above 2.0 — genuinely rare. Treat the number with suspicion: small sample, leverage hiding tail risk, or you're cherry-picking the window.
Sharpe is the metric you check when you stop asking how much did I make? and start asking was it worth it? A strategy with a Sharpe of 1.4 and 8% annual return is usually a better foundation to scale than a Sharpe of 0.4 with 25% — the second one will break you on the first bad month.
In TradeOnyx your Sharpe ratio sits in the Overview tab under Advanced metrics, right next to win-rate and profit factor. It updates with every closed trade — no spreadsheets, no manual math, no waiting for end-of-month. The moment you flatten a position the number is recomputed against your full equity history.
Use the period filter on the Overview tab to compare your Sharpe across last week, last month, last year. That's how you spot whether your edge is actually stabilising over time or just got lucky in a single hot stretch — TradeOnyx surfaces both numbers side-by-side so the comparison takes one glance.