Sharpe Ratio Benchmark?

H

hilojack

I have a system that auto trades forex and breaks up the trades by currency pair. The system runs 3 different ways on each pair with varying degrees of results.

I want to be able to run metrics on each individual pair traded and then on the portfolio in general.

My question is: what should I use as a benchmark to compare results against? T-bills? Money-markets?

Does anyone have any experience with generating reports for forex systems?

Thanks

hilo
 
sharpe ratio is by definition:

http://www.investopedia.com/terms/s/sharperatio.asp


But you're question is dependent on the time horizon of your trades. I would just take the average holding period time for the systems and tie that as your risk free rate - so if you borrow margin at .25%, use that. If you hold for months, use a longer term rate... But you're actual margin interest rate is likely higher than the current rates, so use that as a risk free rate.

You'll quickly figure out that the Sharpe Ratio is highly misleadings during times like this when rates are so low. If you took a 5 year window for risk free rates, you're ratio would get cut significantly....
 
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