Sharpe vs Sortino vs Calmar: which matters for prop trading?
All three reward return per unit of risk — they just disagree on what ‘risk’ means. On a funded account, that disagreement decides which one you should actually watch.
A raw return tells you nothing about how much pain produced it. Risk-adjusted ratios fix that, but each defines risk differently.
| Ratio | Risk = | Penalises |
|---|---|---|
| Sharpe | Total volatility (std dev) | All variation, up and down |
| Sortino | Downside volatility only | Only losing-side variation |
| Calmar | Maximum drawdown | The worst peak-to-trough fall |
Sharpe
Return divided by total volatility. Useful and universal, but it punishes upside volatility too — a strategy with big winning spikes can look “risky” even though those spikes are good. It also says nothing about the depth of your worst slump.
Sortino
Like Sharpe, but only counts downside deviation. It stops penalising you for large gains and focuses on the variation that actually hurts. A better fit for asymmetric, big-winner strategies.
Calmar
Return divided by maximum drawdown. It speaks the language of prop trading directly, because max drawdown is what breaches your account. A high Calmar means strong return relative to the worst fall you'd have sat through.
Which matters on a funded account
Prop trading is a drawdown-survival game: the trailing or static floor ends accounts, not standard deviation. So Calmar and Sortino are more relevant than Sharpe — they weight the downside and the worst fall, which is exactly what your account rules test. Don't read any ratio off a single backtest, though; confirm it across a distribution and check it isn't overfit.
Puravida Edge reports Sharpe, Sortino and Calmar per strategy alongside the annualized blow rate — see the strategies and methodology.
FAQ
What's the difference between Sharpe, Sortino and Calmar?
Sharpe divides return by total volatility, Sortino by downside volatility only, and Calmar by maximum drawdown. They reward return per unit of risk but define risk differently.
Which ratio matters most for prop firm trading?
Calmar and Sortino, because prop accounts are ended by drawdown, not by upside volatility. Calmar uses max drawdown directly; Sortino focuses on downside variation.
Why isn't Sharpe enough?
Sharpe penalises upside volatility and ignores the depth of your worst drawdown — the very thing that breaches a funded account. It's useful but incomplete for prop trading.
Not financial advice. Performance figures referenced are hypothetical, modeled outputs (1,500-path Monte Carlo on a 12-month sample). Past performance does not guarantee future results. Tool names are referenced for education; verify current features and prop-firm rules directly.