Published: May 27, 2019 3:10 pm est
by Tom Kadale,
Contributor Market Analyst
NewsmovesMarketsForex
Have you ever seen a sustained Sharpe Ratio above 3? Our algo for FX trading hit a high of 3.9 this week. Could our performance become a new normal? Here are some tidbits to consider… Sharpe Ratio’s are used to compare the performance of funds with a range from 0 to 4.
It measures the level of volatility required to achieve a sustainable ROI. The higher the Sharpe Ratio, the lower the volatility or downside risk encountered. Another common indicator is the maximum drawdown or the maximum loss at any one time over a specific period. For the past two years ours has been at 8%.
To gain a further appreciation, consider the following. Most funds have a Sharpe Ratio around 1. The really good ones hover over 2. The exceptional ones hit 3. Our algo has been above 3 for the past two years and just this week hit a new high of 3.9. There is no industry category to describe our achievement!
We are, essentially, “off-the-charts”. Harnessing FX trading with a sustained 3.9 Sharpe Ratio would be like using a team of broncos to lead the Queen’s carriage down Buckingham Palace lane and not spill a drop of tea! Based on our stellar record, algorithmic trading may soon become the new normal in FX trading.
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From the RagingFX Trading Desk… Tom Kadale, Forex Algorithm engineer RagingFx.com and Guest Contributor Market Analyst for NewsmovesmarketsForex