Calmar ratio
Volume Profile Analysis glossary · Volume Profile Technicals
Definition
A risk-adjusted return metric equal to annualized return divided by absolute maximum drawdown; measures how efficiently a strategy generates return relative to its largest peak-to-trough excursion.
Calmar ratio in plain English
The Calmar ratio is a report card for a trading strategy that asks: "How much did you earn each year compared to your scariest crash along the way?" You take the yearly return and divide it by the biggest peak-to-valley drop the account ever suffered (the "maximum drawdown"). A higher number means you got good returns without gut-wrenching plunges. It's like judging a road trip not just by how far you got, but by how deep the worst pothole was — smooth-and-far beats far-but-terrifying.
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