Sortino ratio
Volume Profile Analysis glossary · Volume Profile Technicals
Definition
A variant of Sharpe ratio using only downside deviation in the denominator; rewards strategies with positive skew.
Sortino ratio in plain English
The Sortino ratio is a fairer cousin of the Sharpe ratio. Sharpe punishes ALL bumpiness, but let's be honest — nobody complains when their investment jumps UP; the only pain is when it drops. So Sortino measures your reward against only the DOWNSIDE wobbles, ignoring the happy surprises. It's like judging a bus driver only on the scary brake-slams, not on the pleasant times they sped you along early — it rewards strategies whose surprises tend to be good ones.
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