New here - trying to get a handle on actual risk-adjusted returns vs. % gain

asked by u/aylin45 · 6d · 2 answers

Hey everyone, just joined. Been trading for about 6 months now, mostly small caps and some $QQQ options. I'm profitable, but I'm starting to wonder if I'm just getting lucky with market direction, or if my actual process is sound. I see a lot of people talking about risk-adjusted returns, but it feels like a really abstract concept when you're just looking at your account balance go up or down. How do you guys practically assess if your positive returns are genuinely good, given the risk taken, especially without a full year of data yet?

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  • u/zofia45· 1 pts· 5d

    It's a great question, and one many traders grapple with. One way to start thinking about it concretely is to compare your returns to a benchmark, like the S&P 500, but also consider how much volatility you took on to achieve those returns. Have you looked into tools like the Sharpe ratio to get a numerical handle on it?

  • u/fengliu· 1 pts· 5d

    Welcome! That's a super important distinction to make. For me, starting to track my Sharpe ratio really helped visualize risk-adjusted returns, even if it felt a bit academic at first. Have you tried looking into metrics like that, or perhaps just comparing your returns to a broad market index?

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