Sharpe Ratio Calculator

The Sharpe ratio, introduced by Nobel laureate William F. Sharpe in 1966, measures the return an investment earned above the risk-free rate for each unit of risk it took on, where risk is defined as the standard deviation of returns. The formula is (return − risk-free rate) ÷ standard deviation. The numerator is the excess return, the reward for taking risk; the denominator is the volatility, the amount of risk endured to get it.

A higher Sharpe ratio means more return per unit of volatility. Because raw returns say nothing about how bumpy the ride was, the Sharpe ratio lets two very different investments be compared on a level footing. To annualize a Sharpe computed from shorter-period returns, it is multiplied by the square root of the number of periods in a year, which is why this calculator offers an optional periods-per-year field.

The Sharpe ratio is one of the most widely cited measures of risk-adjusted performance in all of finance. It is used to compare portfolios, funds, and strategies, and to ask whether a given level of return actually justified the volatility that came with it. As a rough industry convention, higher is considered better, though the ratio has well-known limitations: it treats upside and downside volatility the same and assumes returns are reasonably well-behaved.

It is a descriptive statistic about a past track record, not a prediction of future results, and interpreting it is entirely your own responsibility.

TradingView is one of the most widely used charting and market-analysis platforms, where traders and analysts study price movement across stocks, crypto, forex, and futures on interactive charts. Pine Script is TradingView's own lightweight programming language, created so anyone can build custom tools that run directly on those charts.

People use Pine Script to build four main kinds of tools. Indicators calculate and plot values on the chart, exactly like the calculation above, but recomputed automatically on every bar. Strategies add explicit entry and exit rules and can be backtested against historical data in TradingView's Strategy Tester to see how they would have behaved. Screeners scan many symbols at once for conditions you define. Alerts notify you the moment a condition you specified occurs, so you do not have to watch the screen.

The value is precision and automation. Instead of eyeballing a chart, you describe exactly what you want measured, visualized, or notified about, and TradingView runs it consistently across any market and timeframe. That is why traders, analysts, and developers write Pine Script: it turns a manual charting idea into a repeatable tool. These tools are for tracking, visualizing, and testing market ideas; they do not tell you what to trade, and that decision always remains yours.

Writing that code by hand means learning Pine Script's syntax, its type system, and the exact names of hundreds of built-in functions. It is a real programming language, and small mistakes stop a script from compiling in the Pine Editor.