The Sortino ratio only counts downside volatility as risk. Here is the formula, a worked example you can check by hand, what a good number looks like, and four ways it can mislead you on a backtest report.
Adrian Reid
Adrian is a full-time private trader based in Australia and also the Founder and Trading Coach at Enlightened Stock Trading, which focuses on educating and supporting traders on their journey to profitable systems trading. Following his successful adoption of systematic trading which generated him hundreds of thousands of dollars a year using just 30 minutes a day to manage his system trading workflow, Adrian made the easy decision to leave his professional work in the corporate world in 2012. Adrian trades long/short across US, Australian and international stock markets and the cryptocurrency markets.
His trading systems are now fully automated and have consistently outperformed international share markets with dramatically reduced risk over the past 20+ years.
Adrian focuses on building portfolios of profitable, stable and robust long term trading systems to beat market returns with high risk adjusted returns. Adrian teaches traders from all over the world how to get profitable, confident and consistent by trading systematically and backtesting their own trading systems. He helps profitable traders grow and smooth returns by implementing a portfolio of trading systems to make money from different markets and market conditions.
Discretionary vs Systematic Trading: Which Actually Works?
Discretionary vs systematic trading: what each one really means, what the data says about traders who make their own calls, the honest downsides of trading with rules, and a 3-question test to find out which one you are.
Leveraged ETF: How 2x And 3x Funds Really Work (And Why They Decay)
A leveraged ETF can lose money while its index goes nowhere. Here is how 2x and 3x funds really work, the maths of volatility decay, and how a systematic trader tests one before trading it.
What Percentage of Traders Lose Money? Every Study, Sourced
Between 63% and 97% of retail traders lost money in the studies that counted individual accounts. Here is every study with who was measured, what counted as losing, the period and a link to the primary source, plus ASIC’s Australian data and the trading statistics you should stop quoting.
Is Day Trading Easy? The Honest Answer (And What To Do Instead)
Is day trading easy? No. It is easy to start and very hard to do profitably – fewer than 1 in 100 day traders earn a reliable profit after fees. Here is why, and the end-of-day systematic alternative that takes 20 to 30 minutes a day.
CAGR In Trading: What It Really Tells You (And What It Hides)
CAGR is the headline figure on every backtest report, and the number traders most often fool themselves with. What it is, how to calculate it, a realistic target range, and the numbers you must read beside it.
Quantitative Trading: What It Is And How A Private Trader Actually Does It
Quantitative trading is buying and selling using objective, tested rules instead of opinion. Here is how the institutional version differs from what a private trader runs on end-of-day data, and how to build your first quantitative trading system.
Gold and Interest Rates: The Intermarket Signal That Halved Gold’s Drawdown
Six gold systems built on price alone failed my testing. So I stopped looking at gold and started watching the market that drives it – US interest rates. Here is what 22 years of data says about gold and interest rates.
Richard Dennis and the Turtle Traders Experiment
How Richard Dennis and William Eckhardt settled a bet by training novices as the Turtle Traders, what the rules were, and what the experiment really proved.
Ed Seykota: Lessons From a Trend Following Pioneer
Who Ed Seykota is, how he pioneered computerised trend following in the 1970s, and the lessons from his Market Wizards interview that still apply today.
Types of Traders Explained: Which One Are You?
The main types of traders explained, what actually defines each one, and how to work out which trading style fits your personality, objectives and lifestyle.
Mean Reversion vs Trend Following: Which Fits You?
Mean reversion and trend following compared: how each behaves in different markets, their win rate and drawdown profiles, and why systematic traders run both.