What is Sharpe Ratio? Maximise profits using this formula

IceLincoln

jr. member

Activity: 98

Merit: 8

Quote from: memehunter on October 08, 2024, 09:03:57 AM

The formula presented is incorrect. The correct formula for the Sharpe ratio is:
S.R = (Rp - Rf) / σp
Where σp is the standard deviation of the portfolio returns, not the "standard deviation of the portfolio's excess returns" as stated.

Yeah I know the formula I just used S to represent the sigma I couldn’t find it in my keypad.
Maybe I should have copied and pasted it from somewhere. I’ll take from yours, thanks for the correction

Oshosondy

legendary

Activity: 1610

Merit: 1193

Gamble responsibly

You make explanation with no examples. Have you been thought in mathematics before that such will be explained but not example. You need to explain what you are referring to.

You can use bitcoin price for the explanation and example.

But in my opinion, investment does not need much mathematics. If you know the basic mathematics, you can invest.

memehunter

member

Activity: 154

Merit: 47

The formula presented is incorrect. The correct formula for the Sharpe ratio is:
S.R = (Rp - Rf) / σp
Where σp is the standard deviation of the portfolio returns, not the "standard deviation of the portfolio's excess returns" as stated.

IceLincoln

jr. member

Activity: 98

Merit: 8

Do you know being a math whiz can help you boost your odds at trading.
This works well with Forex Trading, it’s a technique that might also work on crypto trading.
William Sharpe created a tool known as sharpe ratio, this measures your investment risk
   S.R = (Rp - Rf) / σp
Where Rp = Return of portfolio
   Rf = Risk free rate
   σp = Standard Deviation of the portfolio’s excess returns

Using the Sharpe ratio as part of your fundamental analysis strategy helps to provide important financial information that can be used to make smarter trading decisions.

It’s this math formula that most smart investors use to size up a portfolio’s quality. It’s all about checking if the potential cash you’ll make balances the risk you’ll be taking. This combo of potential profits and risks is called Risk Adjusted Returns, and that’s exactly what this formula helps you figure out.
Now you might be thinking by the time you finish this math the market might close on you, but with practice and time you get used to it and it becomes faster.
The Sharpe ratio crucially relies on past data, guides informed decisions and helps traders navigate market volatility.

You can research further and start practicing this if you haven’t

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