Calmar Ratio
Definition
The Calmar ratio divides annualized return by the maximum drawdown experienced during the same period. It specifically measures how well returns compensate for the worst-case drawdown scenario.
The Calmar ratio is particularly useful for prop traders because it directly relates profitability to drawdown — the two metrics that matter most for prop firm success. A Calmar ratio above 3.0 suggests a strategy that generates strong returns relative to its worst drawdown, making it well-suited for prop trading.
For example, if your strategy generates 60% annual returns with a maximum 10% drawdown, your Calmar ratio is 6.0 — excellent. But if those same 60% returns come with a 30% max drawdown, the Calmar ratio is only 2.0, and that 30% drawdown would violate most prop firm rules.
When evaluating your trading system for prop firm compatibility, the Calmar ratio tells you whether your historical drawdown profile fits within the firm's limits. PropJournal tracks both your Calmar ratio and Sharpe ratio, giving you a comprehensive view of risk-adjusted performance.
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