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Risk Management

Sharpe Ratio

Definition

Risk-adjusted return measuring excess return per unit of risk.

Understanding Sharpe Ratio

Sharpe Ratio is an important concept in stock market trading. Understanding this term will help you make better trading decisions and communicate effectively with other traders and financial professionals.

Key Points

  • Basic Definition: Risk-adjusted return measuring excess return per unit of risk.
  • Category: This term is commonly used in Risk Management
  • Relevance: Essential knowledge for traders operating in Indian stock markets

Practical Example

When trading on NSE or BSE, you'll encounter sharpe ratio regularly. For example, understanding this concept helps you analyze market conditions, make informed decisions, and manage your trading positions effectively.

Related Concepts

To fully understand sharpe ratio, you should also be familiar with related trading concepts. Check out the related terms in the sidebar for a comprehensive understanding of this topic.

Related Terms

  • Risk Reward RatioThe ratio between potential loss and potential profit on a trade.
  • DrawdownThe peak-to-trough decline in account value before a new high is reached.
  • Win RateThe percentage of trades that result in a profit.
  • ExpectancyThe average amount you can expect to win or lose per trade.

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