Back

What is the benchmark sharpe ratio for Forex Market

In the equities market you can buy and hold the SPY or another index and expect to receive atleast a 0.75 Sharpe and atleast a 0.4 PSR. You could also buy and hold SHY (short term bonds) and make a decent risk free(minimal risk) return. 

The forex market isn't designed to go up with buy and hold strategies. What is the benchmark or reasonable level of sharpe one could achieve ? What have you seen on the alpha market's, in research papers, and in other algorithms? Please post a link or reference source if you can. I guess another question to ask is what is the risk free rate of return in the FX market. If the overnight fed funds rate for banks os near 0....then why is the alpha market requirement of PSR to be 80% or higher? 

My guess is that anything about 0.25 Sharpe and 0.15 PSR would be above average for the FX  market.  

Update Backtest







0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


Choosing any benchmark is fairly subjective and depends on what you're trying to achieve. We recommend using an "absolute" benchmark - meaning a fixed Sharpe Ratio regardless of the underlying assets.

I'd aim for a Sharpe of 1.0 or above; and if you achieve that then the PSR will rise as well. The current PSR score is a probability the live-sharpe ratio is greater than 1.0; if the backtest Sharpe is less than 1.0 it will be hard to make a higher PSR. 

0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


Update Backtest





0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


Loading...

This discussion is closed