Sortino RatioRisk Management
Looking at returns as a raw percentage is deceptive. A trade should not only be measured by the amount of money it made you or the percentage return you gained from the trade. The true measure of success is a high measure of Risk-Adjusted Return. The higher your risk adjusted return, the lower the amount of risk you took to make a higher return, and the more skilled you are as an investor or trader.
The Sortino ratio attempts to fix problems found in the Sharpe ratio. Extreme upside volatility decreases the Sharpe ratio but is beneficial to investors. Upside volatility shouldn’t punish risk-adjusted returns since it’s not a risk. Another benefit of the Sortino ratio is it uses the minimum accepted return instead of the risk-free rate. If your minimum accepted return is the risk-free rate, your MAR is pretty low. The MAR is typically the inflation rate (for bonds) or a market benchmark (for equities, equity funds, or equity derivatives funds). A higher Sortino ratio should always be preferred, especially against a high minimum acceptable return.
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International Economic Analysis:
- Major Currency Economic Summaries
- Performance of Major Imports and Exports
- Mandates of Central Banks versus Expectations
- Performance Indexes of Major Economies
- Economically Correlated Currency Projections
- Large Funds Currency Sentiment Readings
- List of Technical Indicators to Look For
- Occasional: Foregin Exchange Technicals Markups
American Markets Analysis:
- Summaries of American Economic Structure
- Performance of Major
- Federal Reserve Mandate versus Expectations
- Performance Indexes of U.S Economy
- Economically Correlated U.S Dollar Projections
- Large Trading Fund Index Sentiment Readings
- Market Wide Earnings Versus Valuations
- Fundamental Ranking of U.S Business Sectors
- Best and Worst Future Consensus Estimates
- Occasional: Firm Fundamental Strength Report
- List of Technicals to Look for While Trading
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