Glossary · Risk
Sharpe Ratio
Risk-adjusted return — how much profit you earn per unit of volatility.
Borrowed from finance. A bettor making +5% with low variance has a higher Sharpe than one making +8% with massive swings. Higher Sharpe = smoother equity curve = easier to size up confidently.
Formula
Sharpe = (mean return - risk-free rate) / standard deviation of returns