Strategy and performance
Sortino ratio
A variant of the Sharpe ratio that counts only downside volatility. Large gains no longer lower the score, so it measures the variability a trader actually minds rather than all of it.
GFN’s figure
Downside variability is what GFN's rules test: the daily loss limit measures a single day's worst point, and the maximum drawdown measures the worst run.
In detail
Sortino ratio,explained
Sortino is the more honest measure for a strategy with an asymmetric return profile - trend following, for example, where the upside outliers are the point of the strategy.
Like Sharpe it is a summary of the whole sample, so it can look healthy while containing one stretch deep enough to breach a hard floor.
Related
Terms thatcome with it
Most rules only make sense next to the ones they interact with. These are the entries this one depends on.
Sharpe ratio
Return above a benchmark cash rate, divided by the volatility of those returns. It measures how much variability was accepted per unit of return, so a smoother equity curve scores higher.
Profit factor
Gross profit divided by gross loss across a sample of trades. A profit factor above 1 means the strategy made money; below 1 means it lost, whatever the win rate suggests.
Peak-to-trough
The decline from an equity curve's highest point to its lowest subsequent point before a new high is made. It is the standard way of stating how deep a strategy's worst historical losing run was.
Equity curve
A chart of account equity over time. Its slope shows the rate of return, its smoothness shows consistency, and its deepest dip is the peak-to-trough drawdown a risk limit would have had to absorb.
Drawdown recovery
The gain required to return an account to its previous peak after a loss. Recovery is not symmetrical: a 10% loss needs an 11.1% gain to undo, and a 50% loss needs 100%.
Ready when you are
Your capital stays yours.The risk is ours.
One evaluation fee, no time limits and up to 90% of simulated profits. Pick an account size and your credentials arrive by email within minutes.
No subscriptions or hidden fees
Payouts every 14 days
$400,000 max total allocation