What Is the Sortino Ratio? Sharpe, but Only Punishing Losses

The Sortino ratio is a close cousin of the Sharpe ratio. Both divide your return by a measure of volatility — but Sortino uses downside deviation only, counting just the trades that went against you and ignoring the size of your winners.

Sortino ≈ average return ÷ downside deviation

Why it exists

Sharpe has a quirk: it treats a +6R winner as "volatility" and dings your score for it, the same as it would a −6R loss. But upside swings are not the risk you worry about. Sortino fixes this by measuring only harmful, below-target volatility — so a system with explosive winners and controlled losers is rewarded, not penalised.

A worked example

A system with a few large winners and small, tightly controlled losses may post a mediocre Sharpe because those big winners inflate total volatility. Its Sortino is much higher, because the downside — the only part that actually hurts — is small. The two numbers together tell you where your volatility lives.

How to use it

• Best for asymmetric systems — trend-following and "let winners run" styles usually look better on Sortino than Sharpe.
• Higher is better — more reward per unit of downside risk.
• Use both — a high Sortino but low Sharpe means big upside swings; a low Sortino means your losing trades are too volatile, which often traces back to position sizing or stop discipline.

How Tracktions tracks the Sortino Ratio

Tracktions automatically computes the Sortino Ratio from your closed trades — no manual entry needed. Once you import or log trades, the Sortino Ratio updates in real time on the Analytics dashboard.

See it in Tracktions →