How Quant Arena calculates it
We take the strategy's daily returns inside the selected window, divide their average by their standard deviation, and annualize with the square root of 252 trading days. The risk-free rate is set to zero so that strategies on different assets and periods stay comparable.
How to read it
Below 0 means the strategy lost money on average. Around 0.5 is typical for a buy-and-hold equity index over long periods; 1.0 or more sustained over many years is rare for a simple rule-based strategy. Values above 3 on daily data almost always point to a data problem, a very short sample or overfitting rather than a genuine edge.
Limits
Sharpe treats upside and downside volatility the same and assumes returns are roughly normal. Strategies that sell volatility or average down can show a high Sharpe right up until a large loss. Always read it together with maximum drawdown and the length of the history.